tax
The drag you can control
The rule
Tax is a cost, but set-off, carry-forward, and holding period are levers you control - use them instead of manufacturing trades.
Where it flips
Saving tax feels like a pure win, so it can start driving the trade. Where it misleads: you sell a business you still believe in just to book a loss. The fix: let the view on the business decide first, then use set-off and carry-forward on top.
Most costs are set by the market, but the tax on gains has legal levers. You can set off a loss against a gain, carry a loss forward for years, and let a holding cross into the lower long-term rate. The habit is to plan these calmly, and never to sell a good business only to save tax.
A worked example
A reader has a ₹1,20,000 short-term gain and a real ₹50,000 loss in a holding they no longer rate. Booking the loss sets it off, so tax is charged on ₹70,000 instead. The lever is used because the view already changed, not to chase the tax. [illustrative]
How to spot it
- ·a real loss set off against a gain in the same year
- ·losses carried forward and recorded year to year
- ·holding period nudging a gain into the long-term rate
- ·a trade whose only reason is the tax
Tax-aware investing · Set-off and carry-forward of losses