Smart LTCG Tax Harvesting

Key facts

Annual exemption

₹1.25 lakh of long-term capital gains per PAN per financial year, under Section 112A of the Income Tax Act, 1961.

Wash-sale rule

India has none — you may reinvest in the same fund immediately after redeeming.

Best timing

February or March, before the financial year closes on 31 March; unused exemption does not carry forward.

Where the saving occurs

Not in the current year. Stepping up your cost basis reduces taxable gains in future years.

Multi-PAN CAS

Each PAN carries its own ₹1.25 lakh limit, tracked and optimised separately.

Execution

Moneyantra is read-only. It recommends what to harvest; you place the redemptions with your fund house or broker.

What is LTCG Tax Harvesting?

Tax harvesting is the practice of redeeming long-term mutual fund units with accumulated gains within the annual ₹1.25 lakh tax-free limit - and immediately reinvesting at the new, higher NAV. This resets your cost basis upward, permanently reducing future taxable gains. Done annually, it can save thousands of rupees in taxes over a long investment horizon.

• Identify funds with the most harvestable gains within the tax-free limit
• Three strategies: maximize tax savings, use existing losses, or exit underperformers
• Step up your cost basis every year to reduce future LTCG liability
• Optimize and track your ₹1.25 lakh annual LTCG tax exemption individually for every PAN in a multi-PAN CAS.

How It Works

1. Analyze Your Portfolio — The tool scans your entire portfolio to identify funds with long-term unrealized gains eligible for the ₹1.25 lakh exemption.
2. Choose a Strategy — Select from three strategies: maximize tax savings, offset losses, or use harvesting to exit underperforming funds.
3. Review Recommendations — Get a prioritized list of funds to harvest from, with exact units/amounts and the resulting gain for each.
4. Redeem & Reinvest — Execute the redemptions outside the platform (we don't transact) and reinvest at the new NAV to step up your cost basis.

Three Harvesting Strategies

Maximize Tax Savings

Book exactly ₹1.25 lakh of LTCG from your best-performing funds to fully utilize the annual exemption.

Use Your Losses

If you have funds with unrealized losses, realize them to offset gains - and harvest gains up to your net tax-free limit.

Exit Underperformers

Combine tax harvesting with portfolio clean-up by exiting underperforming funds within your tax-free limit.

Exemption Tracker

See how much of your ₹1.25 lakh exemption you've used and how much is available to harvest to maximize your tax benefit realization.

Cost Basis Step-up

After reinvesting, your new purchase price becomes the stepped-up cost, permanently reducing your future LTCG.

Individual PAN Harvesting

Track and utilize the ₹1.25 lakh tax-free LTCG exemption individually for each PAN present in your CAS.

Who Benefits Most

Long-term Equity Investors

Investors with multi-year equity fund holdings who have accumulated significant unrealized gains and want to reduce future tax liability proactively.

Annual Portfolio Reviewers

Disciplined investors who review their portfolio every year and want to include tax harvesting as part of their annual financial checklist.

Retirement Planners

Investors building a retirement corpus who want to optimize the tax efficiency of their portfolio over a decade or more, to maximize returns on actual redemption at later stages.

Frequently Asked Questions

What is LTCG tax harvesting?

LTCG tax harvesting is the practice of redeeming mutual fund units with long-term gains within the annual ₹1.25 lakh tax-free exemption and immediately reinvesting at the current NAV. This resets your cost basis, reducing future taxable gains.

Is tax harvesting legal in India?

Yes, tax harvesting is completely legal. You are simply using the annual exemption provided under Section 112A of the Income Tax Act, 1961. There is no wash-sale rule in India that prevents immediate reinvestment.

When should I do tax harvesting?

Ideally in February or March, before the financial year ends on March 31. This ensures you don't miss the annual ₹1.25 lakh exemption window.

Do I save tax immediately?

Not in the current year - the exemption is for gains that would otherwise become taxable. The real saving is in future years, as your cost basis has stepped up, meaning less taxable gain when you eventually redeem.

Does Moneyantra execute the redemptions?

No. Moneyantra is a read-only analysis tool. We provide the recommendations; you execute the redemptions and reinvestments through your fund house or broker.

How does the tool handle tax harvesting for joint or multi-PAN statements?

Each individual PAN has its own annual ₹1.25 lakh LTCG tax exemption limit under Section 112A. If you upload a multi-PAN CAS, our tool automatically splits the holdings and allows you to plan and optimize tax harvesting strategies individually for each PAN.