Tax-Loss Harvesting Deadline Is Today: How Investors Can Use Capital Losses to Cut Tax

Today, March 30, is the last day Indian investors can book a stock market loss and have it count against this financial year's taxes. The exchanges stay shut tomorrow, March 31, for Mahavir Jayanti, so there is no trading session left before the 2025-26 year closes.

The timing matters because of the year investors have had. According to News18, the market has been through a heavy sell-off in 2025-26, tied to Trump's tariffs and the US-Israel-Iran war, and it continues to trade near 52-week lows. The practice at the center of today's deadline is tax-loss harvesting: selling holdings at a loss so the loss can be used to reduce tax owed on gains elsewhere. The Income Tax Act allows losses to be set off in the same year and carried forward for up to eight years.

The rules start with how gains are classified. Short-term capital gains come from selling assets such as listed shares or equity mutual fund units within 12 months; for unlisted assets the window is 24 months. Budget 2024 raised the tax on those gains from 15 per cent to 20 per cent. Long-term gains come from holdings kept beyond those periods, and the rate rose from 10 per cent to 12.5 per cent. Long-term gains of up to Rs 1.25 lakh in a financial year are exempt. Losses are sorted the same way, as short-term (STCL) or long-term (LTCL).

Setting off works in one direction only. A short-term loss can be set against both short-term and long-term gains in the same year. A long-term loss can be set only against long-term gains. News18 gives a simple case: a Rs 50,000 short-term loss on one company's shares, matched with a Rs 50,000 short-term gain on another's, leaves no tax to pay. Capital losses cannot be used against other income such as salary, business income or house property income.

When gains are too small to absorb a loss, the balance is not lost. In the source's example, a Rs 50,000 short-term loss against a Rs 30,000 gain leaves Rs 20,000 that can be carried forward across the next eight assessment years. A second example has an investor with a Rs 1,00,000 short-term loss in 2023-24 and only Rs 40,000 in short-term gains; the remaining Rs 60,000 carries forward.

Carry-forward has conditions. Losses can be used only against the same category of income later: long-term losses against long-term gains, and short-term losses against short-term or long-term gains. The taxpayer must also file the income tax return on or before the due date under Section 139(1). Late filing forfeits the carry-forward benefit. Separately, the article notes that a loss from house property can be set off against income under any head up to Rs 2 lakh.

The piece also lists limits on setting off losses between income heads, citing the income tax department's FAQs. Speculative business losses cannot be set against any other income, though non-speculative business losses can be set against speculative business income. Capital gains losses cannot be set against other heads. No loss can be set against winnings from lotteries, crossword puzzles, races including horse races, card games, or any gambling or betting. Losses from owning and maintaining race horses, and from businesses specified under Section 35AD, such as cold chain facilities, agricultural warehousing and housing projects, cannot be set against other income. Business or professional losses cannot be set against salary income.

For investors sitting on unrealised losses after this year's sell-off, today is the last session to act. The other date to watch is the filing deadline for the return, since missing it would cost them the carry-forward.