Ch.8 · Capital Gains Tax on Mutual Funds · medium
What is 'tax loss harvesting' in mutual funds and when is it most beneficial?
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EXPLANATION
Tax loss harvesting involves selling mutual fund units that are trading at a loss to realise a capital loss, which can then be set off against capital gains from other investments (reducing tax liability). After selling, the investor can immediately repurchase the same scheme (India has no wash-sale rule) to maintain market exposure. This is most effective when an investor has significant capital gains elsewhere and underperforming funds in the portfolio.
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