How I Discovered Tax-Loss Harvesting and Found a Tool That Made It Much Easier

Taxation
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For the longest time, I used to think taxes on stock market profits were just something you simply accept and pay.

But recently I started exploring tax-loss harvesting, and it completely changed the way I think about managing my portfolio.

For context, I’m a Chartered Accountant, so I was already familiar with the tax rules around capital gains. But even with that background, actually implementing tax harvesting for a real portfolio turned out to be more complicated than it sounds.

For anyone unfamiliar, tax-loss harvesting basically means selling stocks that are in loss to offset your capital gains, which reduces the overall tax you pay.

In India this can be quite useful because:

• Short-term capital gains (STCG) on equities are taxed at 20%
• Long-term capital gains (LTCG) above ₹1.25 lakh are taxed at 12.5%

So if during the year you’ve already booked some gains and you’re holding stocks that are currently in loss, you can sell those loss-making positions and offset them against your gains.

This reduces your taxable income from capital gains.

In theory it sounds simple.

But when I actually tried doing this with my own portfolio, I realised the process can get messy very quickly.

You have to deal with things like:

  • FIFO calculations (First-In-First-Out tax lots)
  • Identifying short-term vs long-term holdings
  • Calculating exact quantities to sell
  • Matching losses against existing realized gains
  • Going through hundreds or even thousands of trades in a tradebook

Doing all of this manually in Excel was honestly very time consuming.

So I started looking for tools that could help automate the process.

Most tools I found were either:

• Built for US markets, or
• Focused on portfolio tracking, not tax optimisation.

Eventually I came across TaxHarvestLab.com.

What caught my attention was that it’s built specifically for tax harvesting for Indian investors.

The process was pretty straightforward:

  1. Upload your tradebook
  2. The system calculates FIFO-based capital gains
  3. It analyses your portfolio and identifies loss positions
  4. Then it suggests which stocks and quantities to sell to optimise tax harvesting

What normally takes hours of Excel work was done in seconds.

The most useful part for me was that it doesn’t just show calculations — it actually gives a clear sell plan.

For example:

Sell X quantity of Stock A
Sell Y quantity of Stock B

So you immediately know what action to take.

Another interesting strategy is using the ₹1.25 lakh LTCG tax-free limit each year. Many investors forget that this exemption exists. By harvesting gains strategically, you can reset your cost base without paying tax.

Overall, learning about tax-loss harvesting itself was already valuable. But having a tool that simplifies the calculations makes it much easier to actually implement the strategy in practice.

Curious to know how others here approach this.

Do you calculate tax harvesting manually in Excel, use software, or just ignore it altogether?

Would love to hear what people here are doing.

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I think you might be the right person to give some insights on this.

Is tax loss harvesting only useful if you already have realized capital gains in the same financial year that you want to offset? In other words, does it only make sense when you’ve booked profits and want to reduce the tax liability for that year?

Or is there still value in harvesting losses even if you don’t have any gains this year? For example, would it make sense to deliberately book a loss just so it gets recorded in your ITR, and then carry that loss forward to potentially offset gains in future years (since tax laws allow carrying forward capital losses for several years)?

I’m trying to understand whether people normally harvest losses only when they have gains to offset, or if there’s a strategic reason to do it even without current gains.

Would appreciate some insight on how investors usually think about this, because I can’t quite wrap my head around the practical benefit in the second scenario.

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I do tax harvesting only when the statement from Icici Direct says that I have incurred a loss for a specific share in total. Example - I have 100 shares of TCS. My average cost as per Icici Direct is 3000. Today it is less than 2500. It will show the total loss incurred for TCS. Now I sell the entire lot of 100 shares so that the loss is booked. I do not go and check if 20 shares were profitable or 70 units which i bought over the years is loss. This becomes too complicated and u need to know Fifo method etc. However, since I am selling the entire lot of 100 shares, even though some portion of shares which I bought was profit the net loss will remain the same.
Also as someone advised, doing tax harvesting is great but if you wish to hold the shares, tomorrow if the shares further fall, when u want to buy it back you incurr additional loss. Also brokerage both buy and sell (maybe not with zerodha)

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