Calculate income tax: After the bloodbath in Friday’s session, the Indian stock market has been under selling pressure for the last six sessions. But, this weakness in the equity market can be turned into a huge benefit for the taxpayer. They can reduce their tax liability by harvesting losses.

According to tax and investment experts, if the taxpayer has made a lot of profit in this financial year, he can book the loss in his savings account which is listed under the cost of the average price and raise the capital loss of the income during the settlement. their income tax return (ITR) for the financial year 2022-23.

Tax and investment experts added that tax loss harvesting would also help investors reduce the risk of further losses in a weak market. They advised the income tax payers to take a new position in the counter after pushing the savings further and keep it for a long time. However, they advised taxpayers to avoid the time in the market after booking the losses in their positions.

Talking about how to reduce income tax by reaping losses in a weak stock market, Aarti Raote, partner at Deloitte India said, “The Income tax provisions allow a person to set off losses against income for the year. Taxpayers who have made substantial profits during the year can sell shares from their portfolio. where the stock price has fallen significantly and is expected to fall further. it not only helps the tax payer by reducing the output tax but also eliminates the possibility of further losses due to the decline in the stock price and balance the risks in the portfolio. -long-term and long-term profits but long-term losses can only be made with long-term gains. So it is important here to sell the right type of stocks.”

Tax loss harvesting rules

Explaining the principles of tax harvesting for taxpayers, Vinit Khandare, CEO & Founder at MyFundBazaar said, “Investing in mutual funds, investors are known to capital gains – taxable for the duration of the investment in a particular mutual fund.Tax losses, investors sell their mutual funds at a loss to reduce taxes on capital gains – a useful way to offset capital gains from capital losses incurred paying less tax can only be repaid with long-term profits.”

MyFundBazaar experts said investors cannot set off long-term capital losses against short-term capital gains. While short-term capital losses can be offset against short-term capital gains or long-term capital gains – a way of offsetting capital gains from capital losses incurred paying less tax.

Don’t try to track the market

Warning that one should be cautious while harvesting losses, Rahul Agarwal, Chartered Financial Analyst said, “Despite harvesting tax losses, one should not try to gauge the market. . book losses in their stock that bleed and take new positions in the stock after a further fall that compensates for brokerage and taxes paid when making pluses and minuses on their positions.”

A platform to harvest losses

Manoj Dalmia, Founder and Director of Proficient Equities, said: “In a weak stock market, taxpayers anticipating the loss of productivity may expose losses in its stocks in metals, IT majors and the oil and gas sector”.

Disclaimer: The opinions and recommendations expressed above are those of the individual analyst, expert, or brokerage firm, and not of Mint.

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