Tax Harvesting Before 31 March 2027: The Year Shares Fell and Gold Rose

This page builds on the tax guide, which sets out the rules: equity held more than twelve months is long-term, and the first ₹1.25 lakh of long-term equity gains each year is tax-free. The exemption does not carry forward. FY 2026-27 ends on Wednesday, 31 March 2027.

Your oldest units are sold first, and that decides what you can do

When you redeem mutual fund units, the tax rules treat the oldest units as sold first. You cannot choose which ones go.

That works in your favour for gains. The oldest units have the largest gains and are all long-term, so a small sale books a lot of gain: about ₹3.83 lakh of units, the first 17 instalments, carries the ₹1.25 lakh.

It works against you for losses. The units showing a loss are the newest. To sell them you would first have to sell every older unit, booking all their gains. In a SIP you have been running for years, you cannot harvest the recent losses on their own. A loss is only usable if it sits in a fund where the losing units are the oldest ones: typically a lump sum invested near this year's peak, in a fund you had not held before.

How to book the ₹1.25 lakh

1. Find your long-term gain. Your fund platform's capital gains statement, or the consolidated statement from CAMS or KFintech, shows unrealised gains by purchase date. Count only units bought more than twelve months before the day you sell.
2. Subtract any long-term equity gains you have already booked this year. The ₹1.25 lakh is one limit across all your equity funds and shares, not per fund.
3. Redeem enough units to book the rest, and buy the same fund back the same day or the next. India has no rule against buying straight back.
4. Check the exit load first. Most index funds have none after a few days; many active funds charge 1% within a year of each purchase, but the units you are selling are older than that.

In a direct mutual fund, the round trip costs almost nothing: on ₹3.83 lakh, about ₹4 in securities transaction tax on the sale and ₹19 in stamp duty on the buy-back.

Do it by mid-March. Redemptions take a day or two to process, and the buy-back needs to happen before the financial year ends. Leaving it to the last week risks a holiday or a delay pushing one side into April.

Gold is up sharply. Equity losses can cut its tax

₹2 lakh put into a gold ETF in mid-October 2024 is worth about ₹3.76 lakh today: a gain of ₹1,76,448. Held over twelve months, it is long-term and taxed at 12.5% plus cess, with no ₹1.25 lakh exemption: ₹22,938 if you sold it all.

You might sell some this year to rebalance, since gold has probably grown past its share of your portfolio. If you do, a short-term loss elsewhere can reduce the tax. A short-term loss can be set off against any capital gain, short-term or long-term.

• Short-term loss booked₹22,449₹2 lakh invested on 2 January 2026 is worth ₹1,77,551. Buy back the same day to stay invested.
• Tax saved against long-term gold gains₹2,91812.5% plus cess on ₹22,449 of gold gains that would otherwise be taxed.
• Tax saved against short-term gold gains₹7,004At the 30% slab plus cess. Gold held under twelve months in an ETF, or twenty-four months as physical or digital gold.

Nifty 50 index fund, approximated by the index with about 1.25% a year of dividends. Tax including 4% cess, ignoring surcharge. The short-term gold case assumes the 30% slab.

Gold gains on a gold ETF held over twelve months, or physical and digital gold held over twenty-four, are long-term. Anything shorter is taxed at your slab rate, which is where a loss saves the most.

A loss is worth most against gains that would be taxed

The set-off rules mean a loss you book this year must first be used against this year's gains. Where your only gains are long-term equity gains inside the ₹1.25 lakh, a loss may end up absorbed by gains that would never have been taxed, and tax professionals do not agree on the exact order in which the exemption and the set-off apply. So book a loss in a year when you have taxable gains: short-term equity gains, gold, debt funds, or long-term equity gains above ₹1.25 lakh. Then check how your return's capital gains schedule applies it before you file.

Losses you cannot use this year carry forward for eight years, but only if you file your return by the due date, usually 31 July.

Questions people actually ask

Does harvesting change my investment? No. You hold the same fund and almost the same number of units. Only the recorded purchase price changes.

Will the Budget change any of this? The Union Budget on 1 February 2027 may. Most tax changes take effect from 1 April, which would leave a March harvest untouched, but not all: the July 2024 Budget changed capital gains rates on the day it was presented. Check the Budget before you act. This page will be updated after it.

Can I harvest in shares and ETFs too? Yes, the same rules apply, but each sale and purchase carries brokerage, STT and exchange charges. On shares those run to about ₹238 per ₹1 lakh traded both ways, as the brokerage guide shows. A direct mutual fund costs a small fraction of that.

I invest through a SIP. Do new instalments reset anything? No. Each instalment is its own purchase with its own twelve-month clock. The buy-back after harvesting is simply one more purchase, and it becomes long-term twelve months later.

Where do these figures come from? The SIP and the equity fund are modelled on the Nifty 50 index with about 1.25% a year of dividends, buying on the first trading day of each month, valued on 16 October 2026. Gold is Nippon India Gold BeES closing prices. Your own figures will differ with your fund, your dates and the prices on the day you sell.