Wise to pay 10% LTCG tax ? Or should I offset with losses.

Taxation
1

I have a high LTCG this FY . Whereas STCG is much lesser (within basic income exemption limits ) .

Should I book STCL to offset my LTCG tax liabilities ? Or is 10% tax a very low amount and it’s better I pay that ? ( Because I don’t know how situation may be next year. Maybe my STCG or FnO profits or salary income ends up becoming alot ? This FY, I have FnO losses and negligible salary income)

2

Hey @raghav.95,

STCL can be set off against both LTCG and STCG, whereas, LTCL can be set off only against LTCG.

If you book STCL, you will be able to set them off against your LTCG.

Also, as you have losses from F/O, those can also be set off against your capital gains (both long-term and short-term) in the same year.

You can analyse what is more beneficial to you and make a decision accordingly.

1 Like
3

If you ask me, I have stopped offsetting losses as it creates psychology issues.

2 years back I did this when I had decent positions in stocks like RVNL and RCF. I thought I would sell these and buy them back after 2 days - which never happened as I spotted opportunity in some different stocks. Regret it till date.

Another possibility is that the stocks you sell move upward within the two days you are out of them - a high probability this happens. So the gain to be realised anyway reduces, if doesn’t go to zero.

Thirdly it greatly influences the psychology in case you are a system trader. Prematurely exiting a trade where SL or target is not hit reduces confidence in ourselves and in our system.

At most, even if you are ready to face the above mentioned demerits, do it for STCG only as LTCG tax percentage anyway is lesser with an exemption limit available. Hope I make sense.

4

So true. It happened to me. Tried to do tax loss harvesting and then realised the benefit is low unless the loss is high.
Paying brokerage on two legs. I am with icici direct

5

I agree with all your points . They are inescapable maxims pertaining to human psychology and cognitive biases .

Which is why I used 2 demats to simultaneously sell and buy the same stock in the same day itself.

6

Consult @Quicko if this is even allowed to be counted as harvesting.