Tax Harvesting: Save ₹15,600 Every Year Doing Nothing

Section 198, Income-tax Act 2025 (old Sec 112A) gives you ₹1.25 lakh of equity LTCG tax-free every year. Most investors let this exemption expire unused. Tax harvesting: sell and rebuy on the same day. You reset your cost basis, book the exempt gain, and stay invested. Repeat every year.

The annual saving: ₹1,25,000 exempt × 12.5% tax rate = ₹15,625 saved every year. Spouse does the same = ₹31,250/year. Over 20 years = ₹3.1L+ tax saving (excluding growth on saved tax). How to do it (same day, same fund): In February or March: sell units with > 12 months holding equal to ₹1.25L gain. Immediately rebuy same fund same day. Net transaction cost = 2× exit load (usually 0 on equity after 1 year) + 2× STT (0.1% each). Cost ≈ ₹250 on ₹1.25L. Tax saving: ₹15,625. Net gain: ₹15,375. When NOT to harvest: If holding period is less than 12 months → STCG at 20%. Harvesting STCG makes it worse. Only harvest LTCG (held > 12 months). Joint account tip: Sell in spouse's account too. Each gets ₹1.25L exemption separately. Total ₹2.5L exempt = ₹31,250 saved per year.