How you can save tax on stock market losses

How you can save tax on stock market losses

Losing money on a stock can minimize the damage by claiming the loss as a deduction on your income taxes. Losses are bad, but our tax laws gives us a way to utilize them in a such a way that we can reduce our tax.


Let's talk about capital gains in detail today and know how we should utilize capital gains to minimize our taxes by understanding terms and rules of the income tax department.

Capital gains and loss:

Any profit or loss we get from the sale of capital assets is called capital gains or assets will include shares, real estate, mutual funds, gold etc


There are two losses on the capital gains such as

Short term Capital gains or losses:

Short term means the sale of capital assets or equities less than 1 year from date of buying is known as short term capital gain or loss.

Long term capital gains or losses:

long term means the sale of capital assets or equities more than 1 year from date of buying is known as long term capital gain or loss.


For example, an investor has already booked short-term profit (by selling within 12 months) of Rs. 10,000 in some stocks. At the same time, the investor is sitting on un-realized loss of Rs. 5,000 in some other stocks.


In that case, the investor has to pay short-term capital gains tax at 15 per cent on Rs. 10,000 profit. To reduce short-term capital gains tax liability, the investor can sell the stock on which he is incurring Rs. 5,000 of losses. In that case, the investor's has to pay tax on Rs. 5,000 (Rs. 10,000 - Rs. 5,000), not Rs. 10,000. To keep his holding intact, the investor can later repurchase the stock.


Before booking the losses on your shares for tax gains you have to keep some points in mind such as


     Note down the Purchase date of shares

     Sale of shares on FIFO basis

     Income tax filing before due date

     Looking nature of Market


There are many people who make losses and don't bother to show it in there returns , if they don't show it in returns then they will not be able to use it for offsetting purpose in future.



Keep the contract notes of the transactions and you may need to mention the details of the transactions in the tax form when you file your income tax returns. Calculate your total loss by adding the price of your purchase and sale of the stock to the total loss you incurred while you owned the position. This is the total amount of your claim you’ll use on your tax return.


Reach out to us and we will be happy to sort this for you on facing any trouble while setting off your Capital Losses.


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