Capital gains tax - Selling assets in 2026? How to keep more of your gains and less for the taxman
Tax 2026: As investors book profits from assets such as equities, mutual funds, gold and real estate, capital gains tax often becomes an unavoidable reality. However, tax experts say that with structured planning, individuals can significantly reduce — and in some cases even eliminate — their tax burden in a given financial year.
Capital gains arise when the selling price of an asset exceeds its acquisition cost after adjusting for transfer expenses. While such gains are taxable, the Income Tax Act offers several legal routes to minimise liability — including reinvestment exemptions, strategic timing of sales and the disciplined use of capital losses.
One of the most powerful yet underutilised tools is tax-loss harvesting, a strategy that involves selling loss-making investments to offset gains elsewhere in the portfolio.
“Tax loss harvesting simply means using your losses as tax assets. Most investors ignore losing stocks emotionally, but from a tax perspective, losses are extremely valuable,” said CA Ruchita Vaghan in a recent post on X.
Under Indian tax rules, short-term capital losses (STCL) can be adjusted against both short-term and long-term gains, while long-term capital losses (LTCL) can only be set off against long-term gains. This distinction makes end-of-year planning crucial.
“The biggest mistake investors make is not understanding the set-off rules. STCL is flexible, but LTCL is restrictive — and that changes how you plan your exits,” Vaghan said.
She explains that even investors sitting on profits in equities can legally reduce future tax by booking gains strategically. Since long-term capital gains (LTCG) on equity are taxable only above ₹1 lakh per year, investors can periodically sell and reinvest holdings to reset their purchase cost.
“By harvesting LTCG up to the exempt limit every year, you reduce your future tax burden. It’s one of the cleanest and most ignored tax strategies,” she noted.
Losses that cannot be set off in the same year are not wasted. They can be carried forward for up to eight assessment years, provided the income-tax return is filed on time. Missing the filing deadline means permanently losing the benefit.
“People lose crores worth of tax shields simply because they file late. Carry-forward is a privilege — not a right — and it comes with discipline,” Vaghan said.
India does not follow a strict “wash sale” rule like the US, but tax authorities can challenge artificial or colourable transactions done solely to claim losses.
“There is no formal wash-sale law in India, but intention matters. If transactions lack commercial substance, they can be questioned,” she cautioned.
Beyond harvesting, investors can further reduce capital gains tax by reinvesting profits into eligible avenues such as residential property under Section 54, specified bonds under Section 54EC, or by spreading large asset sales across multiple financial years to stay within exemption limits.
According to Vaghan, the ideal time for tax planning is February to March, when investors have clarity on annual gains and can rebalance portfolios with intent.
“Paying tax without planning is optional. Paying tax without awareness is expensive,” she said.
For investors in 2026, the message is clear: capital gains tax is not just a compliance issue — it is a planning opportunity. Those who integrate taxation into their investment strategy stand to preserve significantly more of their hard-earned returns.
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