Tax-Loss Harvesting

The set-off rules determine the strategy: a short-term capital loss can be set against both short-term and long-term gains, while a long-term capital loss can only be set against long-term gains — so short-term losses are the more valuable to realise. India has no wash-sale rule of the American kind, so repurchasing the same security is not prohibited, though doing so restarts the holding period and could attract scrutiny if the transaction lacks commercial substance. Harvesting is worth doing before the financial year ends, since unused losses must be carried forward and require a return filed on time. The exercise is about timing tax rather than about improving investment decisions, and it should never drive a sale that is otherwise wrong.