Direct answer
For eligible listed equity shares and equity-oriented mutual fund units (where Securities Transaction Tax conditions in Section 112A are met), India's long-term capital gains framework is commonly summarised as: gains on transfers on or after 23 July 2024 taxed at 12.5% on the amount exceeding ₹1.25 lakh in a financial year, without indexation. Short-term equity gains are a separate special-rate topic. Exact outcomes depend on asset type, holding period, STT and the FY you are in.
“Tax harvesting” is an educational concept some investors discuss with a CA — realising eligible long-term gains within the annual exemption band and, where suitable, re-establishing exposure. It is not personalised tax advice and not a trade instruction from Findost / PaisaGuru by Findost. We are not Findoc or FinDost.
FY / AY caveat (read first)
Capital-gains rates, exemption thresholds and reporting schedules are set by law and can change with a Finance Act or notifications. This page reflects the widely cited post–23 July 2024 Section 112A framing (12.5% above ₹1.25 lakh for eligible equity LTCG). Before you act for a specific year, verify:
- Statute text for Section 112A (Income Tax Department / incometaxindia.gov.in)
- E-filing help and AY downloads on the Income Tax e-Filing portal
- Budget / Finance Act materials on indiabudget.gov.in when rates or thresholds are amended
Equity vs debt — high-level contrast
Equity-oriented holdings that qualify under Section 112A follow the special LTCG/STCG framing above (after the correct holding period). Many debt and non-equity products follow different rules — including slab-rate treatment for certain debt fund acquisitions after April 2023. Do not apply the ₹1.25 lakh equity band to every mutual fund category.
Tax harvesting — educational steps
Some investors and CAs discuss an annual hygiene exercise near the end of a financial year:
- Identify eligible units/shares held long enough to qualify as long-term.
- Estimate realised and unrealised gains already in the FY, so you know headroom under the statutory band (commonly ₹1.25 lakh for eligible 112A gains).
- If harvesting, sell enough to realise gains within that band — then decide whether to re-buy (portfolio exposure) after checking exit loads, brokerage, settlement and any practical “same-day trade” constraints on your platform.
- Keep records for Schedule 112A / capital-gains reporting in the ITR.
At a 12.5% special rate, ₹1.25 lakh of gains that fall inside the exempt band implies an illustrative maximum tax of about ₹15,625 on that band alone — useful for intuition, not a promise that harvesting always saves that amount after costs, loads and your full return.
Risks and common mistakes
- Harvesting short-term holdings can create STCG instead of using the LTCG band.
- Exit loads and spreads can erase the educational “tax save.”
- Unused exemption headroom typically does not carry forward.
- Loss set-off and carry-forward rules are technical — file on time if you need carry-forward.
- This is not a reason to churn a portfolio that still matches your goals.
Longer narrative (still educational): The ₹1.25 lakh tax-free rule. Regime choice for salary income is separate — see old vs new tax regime and the Income Tax calculator.