Moment guide · FY 2026-27

I want to book losses to reduce tax

Can I sell losing shares before 31 March and buy them back the same day to reduce my capital gains tax?

Sec 70Sec 71Sec 74Sec 71(3A)Sec 111AVerified 2026-08-11

Yes. Book realised losses before 31 March and set them off under sections 70-74: short-term losses set off against any capital gain, long-term losses only against LTCG, and the unabsorbed balance carries forward 8 years. There is no wash-sale rule in India, so you can immediately repurchase the same asset. Match short-term losses to equity STCG first since 111A STCG is taxed at 20% with no 87A relief for AY 2026-27.

Your legitimate options

Every route the statute actually gives you — with its condition, cap and deadline.

Route	Condition	Cap / deadline
Set off short-term loss	Loss is short-term capital loss (including s.50AA debt-fund losses)	Set off against STCG or LTCG; balance carries forward 8 years
Set off long-term loss	Loss is long-term capital loss	Set off only against LTCG; balance carries forward 8 years
Sell and repurchase same day	You still believe in the asset	Allowed — India has no wash-sale rule (only GAAR/colourable-device risk)
Set off speculative loss	Intraday / F&O loss	Only against speculative gains; balances carry 4 years

The #1 trap

Loss harvesting before 31 March is fully legal in India because there is no wash-sale rule — you can sell a losing position and repurchase the same security the same day; just don't let it become a circular colourable device, and remember 87A does not reduce 111A STCG for AY 2026-27.

The decision path

Follow it top to bottom — the first condition that matches is your answer.

IF you have a short-term loss → set it off against STCG first (including 111A equity STCG), then against LTCG
IF you have a long-term loss → set it off only against LTCG; leftover carries forward 8 years
IF you still want the holding → sell by 31 March and repurchase the same or next trading day — legal in India, no wash-sale barrier
IF you have F&O/intraday losses → set off only against speculative gains; speculative loss carries 4 years
IF you have house-property loss → set off against other heads only up to ₹2 lakh per year under section 71(3A)

Worked example

Priya, product manager invested in equities

Priya is in the 30% slab and holds a diversified equity portfolio. On 20 March 2027 she does her year-end review and realises she has ₹4.8 lakh of short-term capital gains from selling tech stocks in July 2026, plus ₹3.2 lakh of long-term capital gains from an equity sale in November 2026. She also holds two losing positions: ₹1.8 lakh short-term loss in a debt fund (section 50AA) and ₹0.7 lakh short-term loss in an equity stock she still believes in. If she does nothing, her tax is: 111A STCG ₹4.8 lakh × 20% = ₹96,000; 112A LTCG (₹3.2 lakh − ₹1.25 lakh exemption) × 12.5% = ₹24,375; total ₹1,20,375 plus cess. She is annoyed that the 87A rebate cannot reduce the 111A amount for AY 2026-27. Priya books both losses before 31 March. Her total short-term loss is ₹2.5 lakh. She sets it off against the ₹4.8 lakh equity STCG, reducing it to ₹2.3 lakh. The 112A LTCG of ₹3.2 lakh stays untouched. New tax: ₹2.3 lakh × 20% = ₹46,000; plus ₹24,375 = ₹70,375. She saves ₹50,000 before cess. The next trading day she repurchases the same equity stock at roughly the same price. Because India has no wash-sale rule, the set-off is valid; she also records the repurchase date because it starts a fresh holding period for her next 112A computation. The debt fund she does not repurchase, because she prefers PPF for that horizon. She also has an F&O loss of ₹42,000 from a failed intraday strategy earlier in the year. Her consultant reminds her that speculative losses can be set off only against speculative gains, and hers are nil for FY 2026-27, so that ₹42,000 carries forward 4 years. Finally, she documents every trade with brokerage contract notes so the 8-year carry-forward of any unabsorbed loss is easy to prove if the assessing officer asks. A quick call with us dials in the final figure.

Questions people actually ask

Does India have a wash-sale rule like the US?

No. You can sell a losing security and repurchase it immediately without losing the loss. The only risk is if the arrangement is a colourable device, in which case GAAR could apply to an abusive scheme.

Can long-term capital loss be set off against short-term capital gain?

No. Long-term loss can be set off only against long-term capital gains. Short-term losses, however, can be set off against both STCG and LTCG.

For how many years can unabsorbed capital losses be carried forward?

8 assessment years from the year in which the loss was first computed, provided the return for that loss year was filed on time.

Does the ₹1.25 lakh exemption under section 112A apply before or after set-off?

In computing taxable LTCG under 112A, the ₹1.25 lakh threshold applies to the LTCG chargeable at the special rate; current-year and brought-forward losses reduce the gain subject to the statutory set-off order in sections 70-74. Run the set-off first and then apply the threshold.

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Sections: 70, 71, 74, 71(3A), 111A, 112A · Last verified 2026-08-11 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).