INCOME TAX Loss Harvesting Calculation: Investors make capital gains or losses whenever they sell their investments in stocks or mutual funds. Capital gains are taxed based on the holding period of your investment. Experts say that investors can reduce their tax liability to some extent by using the tax loss harvesting method.
According to experts, tax harvesting is one of the most effective ways to reduce tax liability. Read on to find out what it is and how to benefit from this:
“Tax-Loss Harvesting is a method by which one can reduce the tax incidence on their trading gain. The effect of tax loss harvesting is seen at the portfolio level. Suppose during a year a trader has taken many trades and is sitting on a hefty profit. At the end of the year, he will have to pay a tax on his profits, either long term (held for more than a year) or short term,” Vikas Singhania, CEO of online trading platform TradeSmart told FE Online.
Tax loss harvesting is mostly done to lower the payment of short term capital gains tax.
“However, if the trader is holding on to some trades which are showing a loss, he can book those losses and adjust them against the profits booked on other traders. You are basically offsetting the capital gains against the capital loss. Doing this would reduce your tax liability on capital gains. Lower tax outgo helps improve the return on capital for the trader,” said Singhania. Read on to find out how it can be done:
Business Gang 