If I sell my stock holdings (held for more than 1 year) and immediately repurchase them, will still qualify for the long-term capital gains tax exemption?

Taxation
1

I want to book profits under ₹1 lakh but want to stay invested. So I’ll be selling stocks and buying them immediately so that my investment remains the same and I can get tax benefit for 1L redemption this year.

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2

Yes. This is called tax harvesting and is common.

Some platforms like Kuvera help with this since it is legal, but zerodha does not have this feature

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3

To the best of my knowledge, people do this for the following purpose

  1. If you have capital gains from sale of equities. However one or two stocks in your portfolio has incurred losses, people sell these loss making stocks, incur the loss and buy it again. By doing this, the capital gain is offset by capital loss. However do note that Short term capital loss can be offset by both Long term capital gain and Short term Capital Gain. However Long Term Capital loss can only be offset by Long Term Capital Gain and not visa versa.
  2. If you have been holding stocks for a very long term and your original cost of purchase is low compared to market price, then people sell this particular stocks wherein they make profit upto 1.25L i.e the exemption level and use the proceeds to buy the same stock again. By doing this, their original cost will increase without any actual loss. By doing this, you are bringing your cost to the market rate and this will result in lower taxes if and when you sell in future.
  3. Only point being, not sure if you can sell today and buy the same stock same day. I heard that few brokerage or maybe it is for NRI’s this is not allowed on the same day. They can buy the next day. Check on this aspect - something called speculative income etc. Not sure but do your research on this aspect.
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4

A demat transaction should occur, so earlier when settlement was T+2 one had to wait an extra day.
With T+1 settlements, you could sell today and buy tomo.
Intraday sell buy would not count as they’ll set-off without any transaction in demat.

See the explanation

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5

If you sell and buy the same stock same day, it will be treated as Intraday trade…so dont buy the same stock the same day, buy it next day only

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6

What about buying first then selling? I’m guessing that the sell order will sell the earliest purchased units and not the once I bought freshly. Is that incorrect?

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My understanding of this: the central idea is that your broker reconciles your transactions with the rest of the world only at the end of the day, after the market closes. Till then your buy and sell transactions are “with the broker('s books)”.

So: if you sell 100 shares of INFY today at 10am and buy 100 shares of INFY today at 3pm, your broker will cancel out these two purchases in “your page” of their books at the end of the day today, and will not tell the rest of the world that you did these trades.

In particular: they will not tell the depository (e.g., CDSL) where your shares are held in demat form, that any trade happened. So your shares will not go out of your demat account. For capital gains to come into play, shares must go out of your demat account. So: no capital gain/loss applies.

Your broker will report these trades (perhaps after the quarter is over?) to the tax people though, as an intra-day trade, because intra-day trades are taxable events. So you will be liable to pay any tax that comes due because of these trades. Just not capital gains/losses.

8

Yes that is correct.
Transactions are recorded on FIFO - First In First Out.
So whatever was bought first, will be sold first.

9

I see, so the buy and sell transactions should happen on different trading days.

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