How loss harvesting in IT shares might make it simpler to comprise income tax in FY24

ITR submitting: With the beginning of current financial yr, an income taxpayers first job is to start financial planning and check out all avenues that will save one’s money. Finding out income tax saving decisions are one in all them. For a stock market investor, it is little powerful presently as numerous the small-cap and mid-cap shares may be discovered at discounted prices and subsequently future merchants should accumulate extra to do the averaging and sit up for bounce once more of their portfolio shares. However, from income tax return (ITR) perspective, portfolio shares at discounted worth provides a window of different to stock market merchants, notably IT shares as in closing one yr, Nifty IT index has shed to the tune of 17.50 per cent and numerous the IT shares may be discovered at discounted worth presently.

According to tax and funding specialists, ensuing from dump in IT shares in closing one yr, stock market merchants having publicity in IT shares has a chance to reap the advantages of current IT stock positions sing loss harvesting method. They said that stock merchants desires to look out out loss harvesting shares from the IT part as they’re anticipated to proceed beneath stress in near time interval after US Fed flagged off monetary slowdown jitters ensuing from monetary establishment catastrophe in US. as a result of the financial yr 2023-24 has merely begun and IT shares are anticipated to remain weak, notably after the beneath par TCS and Infosys This fall outcomes, IT stock merchants can e-book loss at current ranges and re-enter at lower ranges as soon as extra. This will permit to set off the capital loss in the direction of the capital good factors whereas submitting their income tax return (ITR) for the financial yr 2023-24. However, they advised taxpayers to steer clear of timing the market after reserving the lack of their stock positions.

How loss harvesting shares can comprise income tax

Explaining the income tax pointers in regard to loss harvesting shares, Vinit Khandare, CEO & Founder at MyFundBazaar said, “Investing in equity funds, an investor is known to make capital gains – taxable based on how long one stays invested in the particular fund. However, in tax-loss harvesting, the investor sells their stocks/fund units at a loss to reduce their tax liability on capital gains – a lucrative method to offset the capital gains made on equity against the capital loss suffered to pay a lesser amount of tax. Additionally, a few factors need to be kept in mind in tax-loss harvesting – a long-term capital loss can be set off only against only long-term capital gains.”

Vinit Khandare of MyFundBazaar went on in order so as to add that the investor cannot set off long-term capital losses in the direction of short-term capital good factors. Whereas short-term capital losses is perhaps set off in the direction of each short-term capital good factors or long-term capital good factors – a method to offset the capital good factors made on equity in the direction of the capital loss suffered to pay a lesser amount of tax.

Advising taxpayers to try IT shares to look out out loss harvesting shares, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “IT stocks are more ideal as most of the IT stocks are available at discounted price and these stocks are expected to remain under pressure for next one to two quarter as US Fed has raised concerns about the looming economic slowdown due to bank crisis in US. Due to this, US dollar driven stocks like IT is expected to remain under pressure as they draw around 40 per cent of their business from the BFSI sector.”

In closing one yr, Nifty IT index has shed from spherical 34,350 ranges to twenty-eight,342 mark. Among prime 5 Indian IT shares — Infosys, TCS, Wipro, HCL Technologies and Coforge — Wipro share worth has shed to the tune of higher than 30 per cent in closing one yr whereas Infosys shares have shed spherical 15 per cent whereas TCS share worth has corrected spherical 10 per cent in closing one yr.

Speaking on Nifty IT index outlook, Sumeet Bagadia, Executive Director at Choice Broking said, “Nifty IT index is looking weak on chart pattern and it may become further weak if the index breaches the current support placed at 28,300 levels. IT stocks are expected to attract buying interest by market bulls only when the Nifty IT index gives breakout above 29,100 levels.”

Disclaimer: The views and proposals made above are these of explicit individual analysts or broking firms, and by no means of Mint. We advise merchants to confirm with licensed specialists sooner than taking any funding choices.

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