Comment on Tax loss harvesting opportunity - FY 2017/18

Tharun commented on 27 Mar 2018, 04:15 PM

I think this is a bad idea as you are only carry forwarding the tax liability here. Lets take an example of below stock in loss

Stock: 10 Lupin @ Rs 900 bought on November 2017
Current loss: Rs 1500
Sold and Bought back for tax harvesting: Lupin @ Rs 750
Assumption: Sold 10 Lupin @ Rs 1000 November 2018
Profit with harvesting: Rs 2500
Profit without harvesting: Rs 1000
Tax liability in 2018 with harvesting: 15% on Rs 2500
Tax liability in 2018 without harvesting: 10% on Rs 1000 (long term capital gain for 1 year holding)

I may save some tax this year with harvesting. However when I sell the same stock next year in June, what I saved last year will get added to my profit and has to pay tax on it next year. So you are only carry forwarded tax liability by tax harvesting. There are also below disadvantages.

1. Stock will show profit probably from next day without considering the loss you has occurred on the same stock last FY.
2. Also we have to keep a separate record of old buy price and loss in order to know break even point to make actual profit on the stock.
3. In above example if I didn’t got for harvesting I could have paid only 10% tax under long term capital gain.

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