An investing mistake I made, which I do not plan on repeating

livemint.com:

₹100,000). My past self would've just paid the tax without a second thought. However, there’s a perfectly legal way to try and optimise the tax outgo.

It’s called tax loss harvesting. You are probably familiar with this as some brokers offer guidance on this. But if you are not, this is how it works.

Let’s get back to the example. So, you have a gain, but then it’s likely that in the frenzy of 2022, you ended up buying some loss making, almost bankrupt EPC company stock, with the hope it will go up 10 times. Presently, however, it’s down sharply.

Your friend’s friend who knows someone who knows the operator of the stock, says hold on to it. So, you are holding on to this. Well, what you could do is book the loss on the EPC stock, by selling it.

(And then of course you could buy back the stock.) The result? You can now set off the long-term capital gain against the long term capital loss from your EPC stock. This would limit your tax liability. And, of course, your stock holdings remain the same (in case you buy back the stock).

Of course, you have to bear some cost, but that’s tiny in the overall scheme of things. This, dear investor, is a great way to optimise your taxes. Like I said, it’s called tax loss harvesting.

You pay lower taxes today. And if your EPC stock does well, you effectively defer paying a larger tax liability in future. And in case it does not, well, you took advantage of the loss anyway.

It’s perfectly legitimate (at least that’s what I believe it to be). And something that over time will help you optimize the returns on your investments. Like I said this is a very simplistic way of looking at tax loss harvesting.