How to Save Capital Gain Tax? Use Tax Loss Harvesting to Save Tax in Stock Market
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Over the last 2 years, I have saved over a lakh of rupees in taxes by deploying tax loss harvesting. Tax loss harvesting is a simple concept that requires investors to sell some of their investments at a loss to offset gains that they might have realized elsewhere. Pleasantly, tax loss harvesting is not just about saving taxes but it can also improve the quality of one's portfolio and improve tax-adjusted and risk-adjusted returns. In this video, I shall be taking you through this concept and I sincerely hope all investors will take advantage of this important tax provision
👉 Video Chapters:
00:00 What is Tax Loss Harvesting?
00:42 Some Announcements
01:47 Three Benefits of Tax Loss Harvesting
06:54 6 Important Considerations
👉 Some Useful Resources/Readings:
‣ Shankar's Instagram channel: / shankarnath81
‣ Article by Moneycontrol: www.moneycontrol.com/news/bus...
‣ Article by Zerodha: zerodha.com/z-connect/console...
‣ Article by Valueresearchonline: www.valueresearchonline.com/s...
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#taxsaving #taxharvesting #savetax
Disclaimer: I am not a SEBI registered investment advisor or research analyst. The content posted on this platform is purely for educational purposes and none of it constitutes investing or trading advice. Viewers should do their own research and diligence before investing or acting on the information presented
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Sir ji.. You're a khajana of finance! Keep these videos coming over!
So nice of you, RDX. Thank you for your kind appreciation
I just did this today. I didn't know about FIFO and hence was confused about certain factors relating to it thank you. I would say, almost never overbook your losses to carry it for next year and so on because the calculations might turn out to be too complicated.
I will add you have the most pleasant subscribe call to viewers I have seen in my TH-cam experience! Its amazing!
Thank you very much Kunal. Yes, the subscribe animation took me two green screens to do. It's come out well!
Thank you Shankar, another important one from you. I have been using tax loss harvesting for the past 3 years. Thank you for your valuable inputs.
Most welcome, Rajesh. Good move btw
You deserve a TH-cam award for these previews
Thank you :)
Was working on the same, your video came just in time, many thanks 😊
You’re welcome 😊
Was Searching for this topic since some time. Thanks for such wonderful, knowledgeable videos
Most welcome. Glad you found it useful
Shorts are nice and everyone favorite but your regular videos are far more valuable and educative.
I appreciate that!
Insightful! I will keep this in my mind for tax harvesting.
Great to know that you will be making videos on current affairs.
Best luck!
Thank you Ejaj, I want to have a current happenings program sometime in March
A very good topic discussed,and thumbnail is no exception
Thank you Gokul. Yes, it's an important one for all investors and I've personally saved a few lakhs in taxes over the years by deploying this. Do read the additional readings I have given in the video's description. I generally don't cover everything in the video but complement it with additional resources
Thank you for this information 👍
My pleasure, Harikrishnan, glad you found it useful
Very Very informative video and in the perfect time. Thank you Shankar bro! I have already started identifying the rotten eggs in my basket to kick off 😊
Thank you Yogesh
Thank you
You're most welcome Jitu
A point to remember is that you need to have the money in your account equivalent to the value of stock/ MF you're selling as it takes 2-3 days for the credit of the sales proceed. If the intent is to buy back at the same price of course!
We have moved to t1 settlement now i believe.
Informative video!
Thanks!
another great video, Thank you so much.
Most welcome Lenin Babu. Glad you liked it
Major benefit is you dont need extra capiltal on buying same stock at lower support levels
A big fan of your thumbnails:)
Thanks
👍
Very solid post indeed.
One suggestion would be to keep the discussion topics less technical and in easy to understand which will be helpful to reach out to a broader audience.
One more suggestion if you are going for the Hindi version then keep the topics simpler and shorter than these posts and stick to mutual funds discussion in the beginning. This may sound unpleasant to some but imo it's a fact.
Thanks for your suggestions
Great video as always. I do have a request though. Can you make a video on analyzing companies? In this video as an example you mentioned company A went down to 70 rs and that the price will probably remain around that area for the next 4, 6 quarters. Can you make a video on company analysis which helps you to figure out that projection?
Thank you.
I have been making videos analysing sectors that's available in this playlist (th-cam.com/video/OSHxwS-Ffew/w-d-xo.html). Ofcourse an industry/sector cannot be covered with examining the companies within it so there is a lot of information there. Pls have a look.
How can one follow coffee can investing and tax law harvesting simultaneously.
Thanks that was a wonderful video any suggestions on booking one lakh profit which is tax exempted on equity to improve tax liability im glad you have been taking comments into consideration
Most welcome. Yes, you can try something called "tax harvesting". There is an article by valueresearchonline, check it out: www.valueresearchonline.com/stories/47647/does-tax-harvesting-make-a-difference/
❤
Can you do the videos on covered call and protective put?
Thanks for your suggestion
What is benefits of Case 3: Selling and Buying the same loss making stock if don't have capital gain to offset? Delaying the tax payment? Asking because new purchase price would be lower and effective future capital gain to be higher by same amount
If you don't have any capital gain to offset with the sale of the loss making stock, then tax loss harvesting is ineffective.
Thank you sir for making this video. I have a question here - can a loss in mutual fund be offset with a profit in direct stocks or vice versa in terms of reducing of Capital gains tax?
Most welcome. Yes, you can do that
Shankar Ji, Many thanks for improving the concept of tax savings, like the way you r progressing..
Only small suggestion short video will loose the attention ("as psychology play against" for too many information in quick / short time) ....
As I have "personally unsubscribed few (& not you)" due to too many notifications at certain intervals is disturbing.
Thank you for your advice & suggestions. I can relate to this as a viewer .. but I have another person I need to take care of -- me
Let's start with the user problem i.e. notifications. Thankfully, TH-cam offers the simplest of solutions i.e. tap on the notification bell again to switch off notifications. I am myself subscribed to over 50 channels but have activated notifications in only 3 of them.
Now let's understand what Shorts gives the creator (me):
1. Access to a bigger audience
2. Faster growth in channel leading to higher motivation
3. Ability to present my existing users with information as and when it happens rather than waiting a week to create & edit a long format video
4. Monetization opportunities which allows me to earn some revenue which can be fed back to recruit researchers & offer even better content
It's a privilege and responsibility I have i.e. examine the pros and cons in both light i.e. the person making the content & the person viewing the content .. and take the optimum decision that serves most if not every stakeholder
@@shankarnath Noted with thanks
Also, the first Rs.1L LTCG is exempt from tax? Which means, one can also realise a 1L gain per year by selling and buying immediately even if there are no losses.
If I have enough liquidity…Can we sell stocks in one broker account and buy it from another broker account on the same day??
In-trend and current topics are enough. Not interested in Hindi or videos being short. Thank you, Shankar; I like your content!
Thanks Vaishakh Babu. I will do my best to match your, others, mine & TH-cam's interests. Hopefully a day will come when TH-cam or some platform gives enough filters to decide which content type, presenter, parts of content, language, tone etc. one wants to consume.
Hi Sir,
I have one query that if one sells single stock which was bought more than a year ago in a financial year at some loss, so can one show tax loss for that stock (there is no other capital gain in that financial year) while filing the itr and will that reduce net taxable income?
Hi, capital losses need to be set-off against a capital gain. That's my read of the law. However, please check with your tax advisor in case there is a way out per your situation.
Mr Nath can you recommend some resources or books to learn about tax harvesting?
Hi, I have added a few in the video's description.
If I am not wrong TLH would come into play for LTCG only if one has more than 1L of LTCG as unto 1L is anyhow exempted from taxes, please correct if I am wrong
There is something called tax loss harvesting and something I read which is titled "tax harvesting". I got a little confused the first time I was researching on this. Can you check this on the Internet & reconfirm pls?
@@shankarnath yes, the two are different.
Tax harvesting is for LTCG, where you book 1L profit each year and reinvest as the 1L limit is exempt.
Tax loss harvesting is for both STCG and LTCG, where as said in the video, you books certain losses to cover for profit so your tax liability reduces.
@shankar Nath, Can you please talk about share pledging and zerodha loans against Mututal fund and what is the difference between the both
I'll try. Thanks for the suggestion
thanks. Your platform is the right place to learn complicated topics.
Can short term gain from mutual fund offset by short term loss incurred in direct equity stock
I have read articles that say so but kindly check with your chartered accountant for more updated information
For Ex. If I have 10 stocks in my portfolio out of which 5 have loss and 5 have profit so it's necessary to take advantage of tax harvesting have to sell all 10 stock or just 5 stock which are in loss
Sell all 10 to nullify the tax. Ofcourse, you can buy the 5 profitable stocks after 2 days which is what many people do after saving tax.
@@shankarnath What will happen if we sell and buy on same day same stock. Will it be considered for tax loss harvesting?
@@ferosekhan1704 Kindly check with your tax advisor. He'll be in a better position to explain the pros & cons based on his experience
Can we sell and buy mutual funds om same day for the tax harvesting
I haven't read anything that says one can't. Check with your CA for an opinion.
After selling for cash settlement, it takes 3-4 days. Meanwhile nav may increase. Here we miss that difference. In long run it may effect compounding returns.
@@Fun_Fittness_Finance if we sell and buy on same day, both NAVs should be same right
@@hrishikeshpatil8598 for buying, u need additional funds . If u have , no problem. Can buy
@@Fun_Fittness_Finance it has no effect on compounding. NAV part is correct though👍
Expected little more, like the LTCG and STCG tax and how long they can be used to offset
Hi, please feel free to ask in the comments box. Between the video and the additional reading material I have given, I think a lot of relevant part has been covered. Look forward to your questions
@Shankar Nath Thank you Shankar Ji! Actually I wanted to know how long the STCG will be useful to offset future gains like 1yr, or more, also if we use this feature how can we track our CAGR
1. If you cannot use your capital loss to reduce your capital gains in one year, you can carry forward the losses for up to 8 assessment years. I mentioned that in the video at 06:24
2. As explained in the video, tax loss harvesting is the simple sale of securities and doesn't change the method of calculating one's portfolio returns. You can track your portfolio returns the same way you'll do when you sell shares or MF units irrespective of whichever purpose the sale was done for
@Shankar Nath my mistake totally ,I may have missed it..Thanks again
About the cagr tracking , I usually consider it from the broker app..there if I sell and buy the previous loss or gain will go, in that case maybe I should prepare a personal cagr tracker
Hi Shankar, Always a big fan of your work. But I think tax loss harvesting is not worth of doing for tax save purpose but only to get rid of bad stocks. Let me tell you an example for the 3rd scenario you told, imagine in the first year I bought a share for 100, at the end of the year it went to 70, i sold it and purchased it again at same price 70, next year it reaches 130, now my gain is 60 for which I have to pay tax, if I saved tax for 30 in the first year, anyway in the second year I am going to pay higher tax for a gain of 60. There is a tamil youtube channel called 'investment insights' with English subtitles where he explained it in detail. Instead tax gain harvest is a better strategy (every year 1 lakh gain is exempted from tax)
you can carry forward your losses
Hi Ezhilmani
1. I see you have substituted a portfolio strategy with a single stock strategy. 2. You've assumed the sale of the stock in 1 year
If your portfolio is a single stock and the general objective is to sell after a year - then you are better off not trying out tax-loss harvesting.
Tax-loss harvesting works for me perfectly because I have a bunch of stocks and don't have an explicit aim of selling in an year. I hold some stocks for long & sell some stocks sooner. Tax loss harvesting works best when it is applied over a portfolio as some stocks do well and some don't.
If you end up selling your stocks on short term, there won't be any benefits, but if you end up holding it for long term, the stock might help you reach that Target of 1L profit booking.
@@shankarnath Hi Shankar, i told that just for an example purpose. Some miscommunication, but the point I am trying to make is, tax gain harvesting is very good strategy according to me, i don't know why you didn't talk about it. Tax loss harvest I do only for my losers just to get rid of them, i will also run some more calculations in my mind for the other two use cases that you discussed in this video
Hi Ezhilmani - since the video was on tax-loss harvesting, I didn't talk about tax-gain harvesting. When I make a video on tax-gain harvesting, I will certainly talk about tax-gain harvesting
Thanks for sharing your own practices, happy to learn more about it
Where do I find additional information and HOW TO DO IT. I will be highly thankful
As indicated in the video, I have given a bunch of information/resources in the video's description. Request you to kindly check that out
Can you talk about the stocks in your portfolio
Informative! A quantitative example would have added more value. Like do we have to wait for the delivery process to complete before buying it again?
I'm not sure because I anyways wait for 3-4 days before buying. Kindly consult your trading platform's customer support for specifics.
A timely advice. You could have added more examples
It doesn't fall under tax "loss" harvesting but another thing investors should do every year is to book LTCG of 1 lakh in equities, and buy back the stocks/MFs. This will help reduce tax outgo long term
Yes, that's called "tax harvesting" .. wish there was a more creative term for this.
Pls avoid Ads in between your video Shankar ji
Dear Akshay ji - Ads is how many creators like me earn some income. While it is not sufficient to cover the expenses but atleast something is better than nothing. If advertising income is removed, then lakhs of content creators (incl. me) and maybe even TH-cam will have to close down.
I guess it's a tough choice for both i.e. me as a content creator and you as a content viewer. Alternatives:
a) For me: Put videos behind a paywall which means only paying customers can watch it which reduces my growth
b) For viewers: Subscribe to TH-cam Premium which means forking out some money for an ads-free experience which a majority viewers don't want to
So for now, I am relying on advertisers to finance the cost of creating so that I can recoup some of my expenses while viewers can watch my content for free. If you have some alternative ideas on how this can be a win-win for me & viewers, please do share. Thanks!
@@shankarnath - Hello Shankar Nath Ji -
What I wanted to say is that Ads are OK at either in beginning or at the end Sir, but it will be an honest request to try and avoid (if possible) ads in between your video. It disrupts the flow and the soothing voice commentary of the topic 😉
@@shankarnath - Also, would you please make a video on "financial planning"ong term for mid 30's people.
Typically who have some stocks, some FD, PPF, PF, and MF - but what to do in their next 'power years' of active income and how to manage the plan to create a good corpus 🤝
@@thetallandhandsome Thank you for your suggestion
Dear Sir, please correct month to February 2023 instead of 2022 at 2.15 mins in the video.
We are masters of loss harvesting lol.
Sir, which is best app for mutual fund sip… et money or groww ??
Hi Vijay - both apps are free mobile applications. You can use both for them for a month or so and see which one you like more
Subscribe animation is funny and amazing 😅
Glad you liked it