LTCG tax saving dilemma: Should you book gains before March 31 despite market losses?

With the financial year-end (March 31) approaching, investors often take a closer look at their equity holdings to optimise tax efficiency. Long-term capital gains (LTCG) exemptions provide an important opportunity to minimise tax liability on profitable investments, and careful planning can help make the most of these provisions.

Even in volatile markets, understanding how and when to realise gains can play a key role in managing overall portfolio performance and tax outgo. Today's Q&A explains this in detail in response to a reader's query.

This makes initial long-term capital gains of ₹1.25 lakh tax-free in the hands of the taxpayers. Since this is available every year, it is important to book a minimum of ₹1.25 lakh of such long-term capital gains every year to optimise total tax outgo in the long run.

In case you have only one demat account, you should carry out the purchase and sale transactions on two different days or in the account of different family members. In case you have more than two trading accounts with different brokers, the sale and purchase transaction can be carried out on the same day, but through different brokers’ accounts.

Booking long-term capital gains to avail this initial tax-free long-term capital gains, and your portfolio being in the red are two different things. You should book a minimum of long-term capital gains on listed shares of at least up to ₹1.25 lakh every year to minimise your overall tax incidence on your investments. You need not wait for the market to recover to book the long-term capital gains up to ₹1.25 lakh.

If you have invested for the long term and your goal is reasonably far away, you should not bother about the intermittent volatility that is inherent in equity investing. The red portfolio will turn green with the turn of events.