Capital Gain Tax-Planning for Next 8 years

Almost all investments in Equities (either directly in Stock Market or through MF's) would be at considerable loss at this point of time when the BSE has fallen by 60% (21000 to 9000 levels) from Jan 2008 to March 2009.

No doubt we need patience to recoup from this crash. But in this waiting period we can do a bit of tax planning. Say Mr.X has invested Rs.10,00,000 in Equities which stands at current value of Rs. 5,50,000. There is a notional loss of Rs.4,50,000.

The strategy is to Sell this portfolio of stocks & MF's today and 'REALISE' the loss. Mr.X can buy the same quantum of stocks & MF's the very next day at prevailing price.

The Main Advantages of this Strategy are:

1. By booking Short Term Capital Loss, it can be set off against 'ANY CAPITAL GAIN' arising out of sale of securities or properties. (See attached article for more clarity). In this case Capital gains to the extent of 4,50,000 can be set off against this capital loss.
2. This ST Capital Loss can be carried forward for the Next Eight Years.
3. This could help minimize the Capital Gain Tax Outgo that may arise in the subsequent years.
4. Since Mr.X buys the stocks on the very next day - he continues to participate in any upside potential of the stock.

Why Miss this opportunity? Be Tax-Wise and Gain out of this Bear Market.