March 31, 2014 – Tax Planning Tip – Time To Set Off Gains Arising On Shares/Mutual Funds
- Short Term Gains arising on Mutual Funds/Shares attract Income Tax @ 15%.
- In case, in earlier years, one has suffered some losses from Mutual Funds/Equity Shares Sale, and has accrued some gains on present holding of share/mutual funds, the earlier year loss can be set off by booking profit (i.e. by selling the investment) before the year end.
- Example: One has sold his investments (shares/mutual funds) in FY 2012-13 (or earlier year) and suffered a loss of Rs 2 Lac. And there are profits arising on current year investments. Let’s say these profits are for Rs 2 Lac. A tax saving of Rs 30,000 (plus surcharge & education cess) can be planned by booking profit on this investment (i.e. by selling the current year investments) before March 31 of 2014.
- Once profit is booked, thereafter (may be same day), similar investment can be again made in the similar stocks through fresh investment.
- Similarly, a tax planning can be done in reverse way as well. E.g. there have been some profits booked during the year. And there is some loss arising on some present investments. The loss can be booked before the Financial Year end, and this loss can be used to set off against the earlier gain. And thereafter (may be same day) fresh investment can be done in similar stock.