Tax Harversting

[Shubham]

I have a doubt.

Suppose the total investment in a mutual fund is 2 lakh.The current value is 4 lakh.

LTCG (Long Term Capital Gains) tax applies to gains above 1 lakh, and if I want to do tax harvesting to avoid paying any tax, how much amount do I need to sell?

If I sell the entire investment, I will have a profit of 2 lakh. Out of this, there will be no tax on the first 1 lakh, but I will have to pay 10% tax on the remaining 1 lakh.

 

[wcgxlr8]

Tax harvesting ideally requires you to sell your worst performing funds/stocks (ones that are currently net negative) to show that you made a net loss and then rebuy them the next day. In your case, you will have to pay 10% LTCG on the 1L I believe (experts please do correct me if there are other ways to avoid this)

 

[Krishna finance]

Book Profit upto 1.25 lakhs in current year and remaining profit in next year to avoid tax liability.

 

[17ysaurabh]

I have a doubt.

Suppose the total investment in a mutual fund is 2 lakh.The current value is 4 lakh.

LTCG (Long Term Capital Gains) tax applies to gains above 1 lakh, and if I want to do tax harvesting to avoid paying any tax, how much amount do I need to sell?

If I sell the entire investment, I will have a profit of 2 lakh. Out of this, there will be no tax on the first 1 lakh, but I will have to pay 10% tax on the remaining 1 lakh.

Hi @Shubham
After the budget, the LTCG limit has been increased to 1.25 lakhs.

Your amount has doubled. I suggest you sell half of the stocks and then the profit would be around Rs. 1 lakh.
Since it will be less than the LTCG exemption limit of Rs. 1.25 lakh, it will be tax-free.

Note: If you don't want to use this money, then make sure you have that much amount in your bank. You'll need to buy the stock at the same price so that you don't lose any gains. This is how tax harvesting is done without losing any possible gains.

 

[Raunak Tulsian]

I have a doubt.

Suppose the total investment in a mutual fund is 2 lakh.The current value is 4 lakh.

LTCG (Long Term Capital Gains) tax applies to gains above 1 lakh, and if I want to do tax harvesting to avoid paying any tax, how much amount do I need to sell?

If I sell the entire investment, I will have a profit of 2 lakh. Out of this, there will be no tax on the first 1 lakh, but I will have to pay 10% tax on the remaining 1 lakh.

Hi,
Hopefully the mutual fund is not an ELSS because then there will be a lock in for 3 years.
Other than that, would advise you to sell MF costing 1.25 lacs and harvest profits upto Rs. 1.25 lacs in a year to harvest that profit.