Real-World Capital Gains Scenarios
See exactly how MyTaxHarvest applies Indian tax rules to real investor portfolios. Discover the strategies behind our recommendations.
Gain Harvesting
Strategically realize gains to utilize annual tax exemptions.
Using the ₹1.25L LTCG exemption efficiently
"I should book all my ₹3L unrealized gains to reset my cost basis."
1Current Position
Realized (YTD): ₹0
Unrealized LTCG: +₹3,00,000
2Recommendation
Book LTCG: ₹1,25,000
3Tax Outcome
Taxable LTCG: ₹0
Estimated Tax: ₹0
Remaining unrealized LTCG: ₹1,75,000. Cost basis reset for booked shares.
Reasoning: Only book ₹1.25L - the annual exemption limit. Booking more would trigger a 12.5% tax on the excess. The remaining ₹1.75L should stay unrealized and can be harvested using exemptions in future financial years. The exemption doesn't carry forward, so use it fully each year but don't exceed it.
Loss Harvesting
Realize losses to offset gains and immediately reduce tax liability.
Offset realized STCG with unrealized STCL
"I should hold my losing positions - they might recover."
1Current Position
Realized STCG: +₹1,00,000
Unrealized STCL: -₹80,000
2Recommendation
Book STCL: -₹80,000
3Tax Outcome
Taxable STCG: ₹20,000
Estimated Tax: ₹4,000
Tax saved: ₹16,000 (80K x 20%).
Reasoning: STCL directly offsets STCG at a 1:1 ratio. By booking the ₹80K loss, your taxable STCG reduces from ₹1L to ₹20K. This saves ₹16,000 in taxes at the 20% rate. Because India has no wash sale rule, you can repurchase the same stocks to maintain your position while crystallizing the tax benefit.
Cross-Term Shielding
Use short-term losses to cleverly offset long-term gains.
Cross-term shielding: STCL offsets LTCG
"Short-term losses can't offset long-term gains, right?"
1Current Position
Realized LTCG: +₹2,00,000
Unrealized STCL: -₹1,00,000
2Recommendation
Book STCL: -₹1,00,000
3Tax Outcome
Taxable LTCG: ₹0
Estimated Tax: ₹0
STCL reduces LTCG to ₹1L, then the exemption covers the rest.
Reasoning: Under Indian tax law, STCL CAN offset LTCG (though LTCL cannot offset STCG). Your ₹1L STCL first reduces your LTCG from ₹2L down to ₹1L. The annual ₹1.25L exemption then covers the remaining ₹1L entirely. Result: Zero taxable gains despite having ₹2L in realized LTCG.
Mixed portfolio: Strategic offset sequencing
"This is complicated - I'll just hold everything."
1Current Position
Realized LTCG: +₹1,80,000
Realized STCG: +₹60,000
Unrealized LTCL: -₹30,000
Unrealized STCL: -₹40,000
2Recommendation
Book LTCL: -₹30,000
Book STCL: -₹40,000
3Tax Outcome
Taxable LTCG: ₹25,000
Taxable STCG: ₹20,000
Estimated Tax: ₹7,125
Savings: ₹11,750 (Tax w/o harvest would be ₹18,875)
Reasoning: By booking both losses, the offset sequence is: (1) STCL ₹40K offsets STCG ₹60K, leaving ₹20K STCG taxable. (2) LTCL ₹30K offsets LTCG ₹1.8L, reducing it to ₹1.5L. (3) LTCG exemption of ₹1.25L applies, leaving ₹25K LTCG taxable. Final tax: (₹25K × 12.5%) + (₹20K × 20%) = ₹7,125.
Carry Forward Losses
Utilize losses from previous years to offset current gains.
Carry-forward LTCL expands effective exemption
1Current Position
Realized (YTD): ₹0
Unrealized LTCG: +₹2,50,000
Carry Forward LTCL: -₹75,000
2Recommendation
Book LTCG: ₹2,00,000
3Tax Outcome
Taxable LTCG: ₹0
Estimated Tax: ₹0
CF-LTCL (75K) + Exemption (1.25L) = ₹2L tax-free capacity.
Reasoning: Carry-forward losses from previous years first offset current gains, THEN the ₹1.25L exemption applies to any remaining gain. With ₹75K CF-LTCL, you can book ₹2L in LTCG completely tax-free: ₹75K is offset by the CF-LTCL, and the remaining ₹1.25L is covered by the annual exemption. This optimally utilizes both the expiring loss and the annual limit.
Carry-forward already consumed by realized gains
1Current Position
Realized LTCG: +₹3,00,000
Unrealized LTCG: +₹1,00,000
Carry Forward LTCL: -₹50,000
2Recommendation
Hold current positions
3Tax Outcome
Taxable LTCG: ₹1,25,000
Estimated Tax: ₹15,625
CF-LTCL already applied. Additional booking is fully taxable.
Reasoning: Your realized LTCG of ₹3L is already partially shielded: ₹50K CF-LTCL + ₹1.25L exemption = ₹1.75L shielded. Taxable LTCG = ₹1.25L. Booking any additional unrealized LTCG now would add directly to taxable gains with no further offsets available. Better to defer to next year when a fresh exemption is available.
No Action Required
Understanding when NOT to act is equally important.
STCG only - booking more gains increases tax
"Should I book gains to reset my cost basis?"
1Current Position
Realized STCG: +₹50,000
Unrealized STCG: +₹75,000
2Recommendation
Hold current positions
3Tax Outcome
Taxable STCG: ₹50,000
Estimated Tax: ₹10,000
Reasoning: Unlike LTCG, there is no annual exemption for STCG - every rupee is taxed at 20%. Booking additional STCG now would only increase your tax bill without any offsetting benefit. The cost-basis reset argument doesn't apply to short-term holdings. Best action: wait for positions to become long-term (>12 months) before considering realization.
Unrealized loss with no gains to offset
"I should book my losses to claim the tax benefit."
1Current Position
Realized (YTD): ₹0
Unrealized STCL: -₹1,50,000
2Recommendation
Hold current positions
3Tax Outcome
Taxable Gains: ₹0
Estimated Tax: ₹0
No realized gains to offset. Booking loss creates carry-forward.
Reasoning: Losses only provide a tax benefit when they offset gains. With zero realized gains this year, booking the loss now merely creates a carry-forward. Carry-forward losses have limitations: they expire in 8 years and require filing your ITR on time. Unless you expect significant gains later this year, holding the position preserves optionality.
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