31st March is the last day of the financial year and thus we have to pay our taxes for the full last year. The tax implications from the salary is been taken care by the company itself. But we have to find the total profit from the Stock Market, Crypto, interest from the FD and then calculate the total tax required to be paid. And this tax is been calculated based on short term investment and long term investment.
PC: Pixabay.com
The good thing is that you have to pay tax only for the profit and thus your profit can be reduced of you have booked some loss. That means
Tax = (Profit - Loss) X Tax Slab (10 or 15%)
So since we have booked the profit for the whole year and thus we might have kept our stocks which are in loss in our portfolio. So this is the time to book the loss in our portfolio because in this way we can reduce our profit and thus decrease the tax we have to pay. This is called tax loss harvesting.
According to Zerodha,
Tax-loss harvesting is a practice of selling a security that has incurred a loss to help investors reduce or offset taxes on any capital gains income subject to taxation. This practice is accomplished by harvesting the loss.
This tax loss harvesting should be done before 31st March. In my case two of the stocks are in loss Tarsons Products and Heranba. So for this two stocks I will be selling those before 31st March and thus will book the loss. This loss will help me to reduce the profits and thus eventually I have to give less tax. So without this loss, I have to pay around Rs 1K as tax whereas if I book that loss then I have to pay only Rs 500 as tax. So I will be savings Rs 500 for tax.
Now the stock which you have booked dl9ss, you can buy that stock again or you can invest in any other stock which can give you good returns in the future. You can buy the stock next day itself after booking the loss. For me out of these 2 stocks, I will be selling both the stocks for loss and then but 1 of the stocks back because I feel that can increase in price.