Investor Tax Loss Harvesting India 2026

You sell an investment that is worth less than you paid, and use that loss to cut the taxable gain on something else you sold at a profit. It is ordinary tax planning: the Act lets capital losses be set off against capital gains.

An example. You bought a stock at ₹1,000 and it now trades at ₹600, so you are ₹400 down on paper. Another stock you sold this year made ₹800. Sell the first one and the ₹400 loss comes off the ₹800 gain. You pay tax on ₹400 instead of ₹800.

You have to actually sell. A paper loss does nothing. If you still like the investment, you can buy it back. India has no wash-sale rule, so the loss stands even if you rebuy the next day. See the capital gains guide.

Not every loss can be used against every gain. Get this wrong and the loss you booked may not reduce the tax you expected.

Carry forward: A capital loss you can't use this year can be carried forward for 8 years. A loss from FY 2026-27 can be used against gains up to FY 2034-35. To carry it forward, the return for the year of the loss has to be filed by the due date (31 July for non-audit cases).

Crypto is the exception. VDA losses can't be set off against anything, including other crypto gains, and can't be carried forward. See the crypto tax guide.

Dividends are taxed at your slab rate. The company also deducts 10% TDS once dividends from it cross ₹10,000 in the year, but that TDS is not an extra tax: it is credited against what you owe when you file. In the 30% slab, a rupee of dividend is taxed more heavily than a rupee of long-term gain at 12.5%.

What some investors do: sell a high-dividend stock before its ex-dividend date and move into a similar one. You don't receive that dividend, and the profit on the shares you sold is taxed as a capital gain instead. This only helps if that gain is long term. If you held the shares 12 months or less, the gain is short term at 20%.

Timing: look up the ex-dividend date before you sell. Selling on or after it means you still get the dividend. In the 30% slab, 13% on a long-term gain is less than 31.2% on a dividend, but run the numbers on your own holding first.

Interest from FDs, savings accounts and bonds is taxed at your slab rate. Two deductions take some of it off, but only in the old regime, and people often claim the wrong one.

In practice: if you are 60 or over and file in the old regime, 80TTB covers FD and RD interest in your own name up to ₹50,000. If you are under 60, 80TTA tops out at ₹10,000 of savings interest. In the new regime, neither applies. The regime comparator shows which regime is cheaper for you.

Debt fund units bought on or after 1 April 2023 are "specified mutual funds" under Section 50AA. Any gain is taxed at your slab rate however long you hold them, and a loss is treated as short term. Units bought before 1 April 2023 are outside Section 50AA. Held long enough, they are taxed as long-term gains, and since July 2024 that rate is 12.5% without indexation. The 20%-with-indexation choice kept in 2024 is for property, not funds.

Newer units: a loss on post-April 2023 debt fund units is a short-term loss, so it can offset both short-term and long-term gains. Harvesting those losses gives up nothing on the tax side, because the gain would have been taxed at slab rate anyway.

If you are rebalancing from debt to equity: sell post-April 2023 units first and keep the older units for as long as they still suit you.

The rule changed twice in two years. From 1 October 2024 to 31 March 2026, buyback money was taxed as a deemed dividend at slab rate, and the cost of the shares became a capital loss. The Union Budget 2026-27 moved buybacks back to capital gains for all shareholders, from 1 April 2026. Promoters pay an additional buyback tax on top.

An example: you bought 1,000 shares of Stock X at ₹500. It now trades at ₹350, and the company announces a buyback at ₹400. You tender all 1,000. You get ₹4,00,000 against a cost of ₹5,00,000, so you have a capital loss of ₹100 per share (₹500 − ₹400), or ₹1,00,000 in all. That loss offsets other capital gains under the set-off rules above.

Important: a buyback loss is a capital loss. It can only be set off against capital gains, not salary or business income. If you have no gains this year, carry it forward by filing on time.