LTCG harvesting and tax-loss harvesting in India, 2026-27

The ₹ 1,25,000 each year

Long-term gains on listed shares, equity fund units and REIT or InvIT units, with securities transaction tax paid, are taxed at 12.5 percent only above ₹ 1,25,000 a tax year (s.198; s.112A of the 1961 Act). It is each person's, every year, and what is left after the year's gains, net of losses, is the room.

With ₹ 30,000 of such gains already made, ₹ 95,000 is left: for an index fund bought every year since 2021, the table below goes lot by lot.

More goes untaxed where a resident's other income is below the basic exemption: the shortfall comes off these gains too (s.196(2), s.197(2) and s.198(3); the proviso to s.111A(1), the first proviso to s.112(1)(a) and the proviso to s.112A(2) of the 1961 Act). A retired person of 67 with a pension of ₹ 3,00,000, ₹ 2,25,000 after the standard deduction, is ₹ 1,75,000 below the default regime's ₹ 4,00,000, so selling an equity fund at a long-term gain of ₹ 2,00,000 leaves the tax at nil.

A gain inside the room still counts in total income, and the default regime's rebate falls once that passes ₹ 12,00,000 (s.156; s.87A of the 1961 Act): on a salary of ₹ 12,00,000, selling 250 shares bought in 2016 realises ₹ 1,25,000 of gain inside the room and takes the tax from ₹ 0 to ₹ 52,000.

The room left, lot by lot

The index fund on 15 December 2026, at ₹ 80 a unit, with ₹ 95,000 of room left, each lot in the order a sale takes it.

The room stops 666.666 units into the third lot, a few paise short of ₹ 95,000, because fund units count to a thousandth. The fourth lot is the later purchases entered as one, dated at the latest of them, so its gain and term are approximate.

First in, first out

Shares and units in a demat account are sold first in, first out (s.67(7)(c); s.45(2A) of the 1961 Act): a sale takes the oldest units first, for cost and holding period alike, and no lot can be chosen. The rule runs within each demat account (CBDT Circular 768 of 24 June 1998, as reported, continued by s.536(2)(j); the same circular, issued under the 1961 Act), so each account's holding is a holding of its own.

So a lot at a loss behind one at a gain cannot be sold alone. With 100 shares bought on 1 August 2019 for ₹ 50,000 and 100 on 1 June 2026 for ₹ 2,00,000, at ₹ 1,400 a share, selling 100 realises the older lot's long-term gain of ₹ 90,000, inside the room; the ₹ 60,000 short-term loss on the newer lot comes only with all 200.

For a long SIP, enter the oldest lots one by one, as far as a sale could reach, and the rest as one last lot dated at the latest purchase and marked as standing for several, as the index fund's fourth lot is. Only the last lot can stand for several.

Buying again: when the new lot turns long-term

The index fund with 2,000 units sold and bought again the same day at ₹ 80 a unit, on four dates.

On 15 December 2026 the sale realises ₹ 75,000 of long-term gain, inside the ₹ 95,000 left, so the tax stays at ₹ 97,500. The 2,000 units still held are sold before the new ones, and a sale of the units bought again before the last column's date is short-term, at 20 percent (s.196; s.111A of the 1961 Act).

Losses, and what they can reach

A short-term capital loss is set off against any capital gain, a long-term loss only against long-term gains (s.108(2); s.70(2) and s.70(3) of the 1961 Act). Each group's loss nets its own gains first, as the return form adds them up, so a long-term loss on listed equity can absorb gains the ₹ 1,25,000 would have left untaxed; the calculator warns when it does.

With ₹ 1,50,000 of short-term gains on shares already made and a salary of ₹ 15,00,000, selling 200 shares bought on 15 May 2026 for ₹ 3,00,000, at ₹ 1,100 each, realises a short-term loss of ₹ 80,000. The tax goes from ₹ 1,28,700 to ₹ 1,12,060, ₹ 16,640 less: 20 percent of the loss plus 4 percent cess.

A loss not set off is carried forward for eight tax years (s.111(2); s.74(3) of the 1961 Act), a 1961 Act year's loss included (s.536(2)(n)), and is set off before the ₹ 1,25,000 applies. A long-term loss of ₹ 2,00,000 from 2018-19 is in its last year in 2026-27: with no sale it lapses in full, and selling an equity fund at a long-term gain of ₹ 1,50,000 uses that much of it, the tax unchanged, so ₹ 50,000 lapses.

Only a loss determined in a return filed by its due date is carried forward (s.121 and s.263(1)(a)(viii); s.80 and s.139(3) of the 1961 Act): for 2026-27, 31 July 2027 (31 August with business income, 31 October if your accounts must be audited).

What the Act checks, and what it does not

• Record dates. A loss on units bought within three months before a bonus record date and sold within nine months after, with the bonus units still held, is ignored and added to their cost (s.175(9) and (10); s.94(8) of the 1961 Act): 100 shares bought on 20 August 2026 for ₹ 1,00,000 and sold on 15 December 2026 for ₹ 60,000, around a record date of 15 October 2026, lose ₹ 40,000 the year does not count. The dividend rule (s.175(8); s.94(7) of the 1961 Act) needs the dividend exempt in your hands, which a resident's is not, though part of a REIT or InvIT payout is.
• No provision in the Act was found that disallows a loss because the same security is bought again; the general anti-avoidance rule (Chapter XI (s.178); Chapter X-A (s.95) of the 1961 Act) does not apply where the tax benefit to all the parties in the year is ₹ 3 crore or less (Rule 128(1)(a) of the Income-tax Rules, 2026; Rule 10U(1)(a) of the 1962 Rules). Whether a sale and a purchase on the same day are genuine transfers is a question of fact for your CA.
• An ELSS fund. Each instalment is locked in for three years from allotment, as reported, and a sale reaching a locked lot is refused: on 15 December 2026 the 1,000 units of the two 2023 lots are free, the next lot from 10 January 2027.
• The last days of March. An exchange trade settles the next trading day (T+1, as reported), and whether the trade date or the settlement date decides the tax year is not settled here; a trade settled by 31 March falls in 2026-27 on either reading.
• Charges. Brokerage can be deducted (s.72(1); s.48 of the 1961 Act), securities transaction tax cannot (s.72(3)(b); the proviso to s.48 on securities transaction tax of the 1961 Act); the calculator shows them beside the tax, ₹ 320 at 0.1 percent on the index fund's sale and purchase, not off the gain.

What the calculator does

For a resident in tax year 2026-27 holding listed shares, equity fund units or REIT and InvIT units, the calculator works the room left, lists each holding's lots first in, first out at the value you enter, and shows how many units from the front fit inside the room. Enter the units you choose to sell and whether you buy them again, and it works the tax before and after, sets off your losses and dates the day the new lot turns long-term, with a list for your CA. It fetches no quote or NAV. It computes the sales you enter and tells you nothing to buy or sell.