Tax Harvesting: Maximising Tax Efficiency in Your Investments

19 May, 2023 2 mins read
Tax Harvesting: Maximising Tax Efficiency in Your Investments


Tax harvesting is a powerful strategy that can help you minimise your tax liability and maximise your investment returns. In this blog post, we will explore how to implement tax harvesting using an example to provide a clearer understanding of its benefits.

Example Scenario
Example Scenario

Example Scenario

Let's consider an investor named Ravi who has invested in two different stocks in India: Stock A and Stock B. After holding these stocks for some time, Ravi realises that Stock A has performed exceptionally well and has generated a significant capital gain of INR 50,000. On the other hand, Stock B has experienced a decline in value, resulting in a capital loss of INR 30,000.

Tax Harvesting Process

Tax Harvesting Process
Tax Harvesting Process

Offset Capital Gains with Capital Losses

Ravi decides to implement tax harvesting to reduce his tax liability. He sells Stock B, which has incurred a capital loss of INR 30,000. By doing so, Ravi can offset this loss against the capital gains from Stock A, reducing his overall taxable income.

Capital Gains Tax Calculation

Assuming the applicable long-term capital gains tax rate in Ravi's case is 10%, his initial tax liability on the capital gain from Stock A would have been INR 5,000 (10% of INR 50,000). However, by utilising the capital loss from Stock B, Ravi can reduce his taxable capital gains to INR 20,000 (INR 50,000 - INR 30,000).

Revised Tax Liability

With the revised taxable capital gains of INR 20,000, Ravi's new tax liability would amount to INR 2,000 (10% of INR 20,000). By implementing tax harvesting, Ravi has effectively reduced his tax liability by INR 3,000 (INR 5,000 - INR 2,000), saving him a significant amount of money.

Tax laiblity comparison
Tax laiblity comparison


Tax harvesting is a valuable strategy that allows investors to optimise their investments and minimise tax obligations. By strategically selling investments with capital losses to offset capital gains, individuals like Ravi can reduce their tax liability and retain more of their hard-earned money.

It's important to note that tax harvesting involves compliance with tax laws and regulations. Seeking guidance from a certified financial advisor or tax professional is recommended to ensure proper implementation and maximise the benefits of tax harvesting. By integrating tax harvesting into your investment strategy, you can enhance tax efficiency and potentially enhance your overall investment returns.

disclaimer: the information provided in this blog is for general informational purposes only. it should not be considered as personalised investment advice. each investor should do their due diligence before making any decision that may impact their financial situation and should have an investment strategy that reflects their risk profile and goals. the examples provided are for illustrative purposes. past performance does not guarantee future results. data shared from third parties is obtained from what are considered reliable sources; however, it cannot be guaranteed. any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. the content provided is neither an offer to sell nor purchase any security. opinions, news, research, analysis, prices, or other information contained on our blog services, or emailed to you, are provided as general market commentary. stack does not warrant that the information is accurate, reliable or complete. any third-party information provided does not reflect the views of stack. stack shall not be liable for any losses arising directly or indirectly from misuse of information. each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. all investing is subject to risk, including the possible loss of the money invested.

it’s time to grow your wealth

3 users 1+ Lac investors are growing their wealth with Stack.
stack mb

unleash your wealth's potential.

© 2023 Stackfin Technology Pvt Ltd.

Mutual Fund distributor with AMFI Registration No. ARN: 171554

StackFin Technology Private Limited CIN number : U72900HR2019PTC080074
Corporate Office: Tower 12, Harlur Main Road PWD Quarters, 1st Sector, Eastwood Two, HSR Layout, Bengaluru, Karnataka, India, 560103. Phone: +91 88848 87900

Financial Products and Services are being provided by StackFin Technology Private Limited and its group companies/ affiliates/ third party service partners listed here

Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.