Tax harvesting can reduce tax outgo. Is it worth it now?

The Union Budget 2024-25 raised the tax rates on gains from equity investments. As a result, investors are eyeing tax-saving strategies more than ever to protect their gains and keep more of their hard-earned money. One such strategy is tax harvesting. But what exactly does this involve, and is it worth considering with the new tax rates? We'll explore in this article. Understanding the new tax rates Before we get into tax harvesting, let's understand the new tax rates on equity investments. Previously, long-term gains (gains from investments held for more than 12 months) were taxed at 10 per cent, and short-term gains (gains from investments held for less than 12 months) attracted a 15 per cent tax. The new budget has increased these rates to 12.5 per cent for long-term gains and 20 per cent for short-term gains. On a brighter note, the tax-exempt limit for long-term capital gains (LTCG) has been increased from Rs 1 lakh to Rs 1.25 lakh. What is tax harvesting? The term has a professional sound to it. In the world of mutual funds, harvesting either means selling its underperformers to offset the gains or using the tax-free threshold of Rs 1.25 lakh to minimise your long-term tax. Confused? H

This article was originally published on September 03, 2024.