This quick hack can help you save tax. Should you go for it?

Taxation on equity investments held for over a year

If your equity investments are over a year old, your gains are taxed at 10 per cent. However, gains up to Rs 1 lakh are exempt from this.

Take advantage of tax harvesting

Suppose you have a Rs 5 lakh investment and the gain is Rs 1 lakh or below, you can withdraw your investment without having to pay any tax!

Tax harvesting can reduce your tax bill

Therefore, you can sell your equity investments that are over 12 months old, realise the gain of Rs 1 lakh or below and reinvest without paying taxes.

Is it worth it?

You only save a small amount in tax (Rs 10,000 on Rs 1 lakh gain) each year. This hassle of selling and reinvesting each year may not be worth it, more so for long-term investors.

Are there other issues?

It takes T+2 (2 working days; not counting the day of the withdrawal request) for the money to be transferred to your bank account. What if there’s a rally then? You’ll miss out!

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