The Tax-Loss Harvesting Calendar for FY 2025-26: When to Book Losses and Gains

Tax-loss harvesting is usually treated as a frantic March activity. Done well, it's a year-round discipline — tied to the advance-tax calendar, the set-off rules, and the financial-year deadline that decides whether a loss counts at all.

This article lays out the FY 2025-26 harvesting calendar: which losses can offset which gains, the 8-year carry-forward backstop and the filing deadline that protects it, the truth about the 31 March cutoff and T+1 settlement, and a quarter-by-quarter playbook synced to your advance-tax installments.

Reading time: ~11 minutes. For the playbook in one screen, jump to the month-by-month calendar.

Why Timing Matters: The Financial Year Clock

In the Indian tax system, the financial year (FY) is a hard boundary. The clock starts on 1 April and stops on 31 March.

While unrealised gains and losses can float in your portfolio for years, the moment you hit "sell" you lock in a tax event for that specific financial year. If you realise large capital gains in October, you owe tax on them. And if you hold onto losing positions and don't sell them before 31 March, those unrealised losses cannot be used to offset this year's realised gains.

Tax-loss harvesting is simply the strategy of deliberately selling positions at a loss before the fiscal year ends to cancel out the taxable gains you've already booked.

The Set-Off Rules

You cannot mix and match any loss with any gain. The Income Tax Act dictates a strict hierarchy for capital-loss set-offs, which the VriddhiQ engine automates for you:

Key insight: STCL is your most valuable tax asset because it is versatile — it can wipe out both 20% short-term gains and 12.5% long-term gains. LTCL is restricted: it can only be used against other long-term gains.

Loss-Harvesting Mechanics

The mechanics are straightforward:

1. Identify the realised capital gains you've booked earlier in the year.
2. Scan your portfolio for assets currently trading below your purchase price (unrealised losses).
3. Sell those losing assets to convert the unrealised loss into a realised loss.
4. The realised loss is immediately subtracted from your realised gains, lowering your net taxable income.

The 8-Year Carry-Forward Backstop

What if your harvested losses exceed your gains for the year?

The Income Tax Act lets you carry forward unabsorbed capital losses for up to 8 consecutive assessment years to offset future gains. But there's a massive catch: you forfeit the right to carry forward any losses if you fail to file your Income Tax Return by the original Section 139(1) due date (typically 31 July for individuals).

Filing a belated return means your unused losses expire for carry-forward purposes immediately. (This rule applies to capital assets; for F&O business losses, see our F&O loss carry-forward guide.)

The 31 March Deadline and T+1 Settlement

31 March is the last day of the financial year — but you shouldn't wait until then to execute harvesting trades.

For listed shares sold on an exchange, the date of transfer — the date that fixes which FY the gain or loss falls in — is generally the trade (contract-note) date, not the settlement date (CBDT Circular No. 704). A sale you execute on 31 March 2026 is therefore an FY 2025-26 transaction even though it settles on 1 April under the T+1 cycle.

Even so, leave a buffer. Year-end brokerage cut-offs, market holidays bunched at the end of March, and the small risk of a dispute over the transfer date all argue for finishing your harvesting trades a couple of business days before 31 March rather than on the day itself.

The Rebuy Rule and Wash-Sale Reality

If you still believe in the long-term potential of a stock you just sold for a loss, can you buy it back immediately?

Yes. Unlike the US, India has no strict 30-day "wash-sale" rule. However — exactly as with gain harvesting — same-day buybacks carry a risk under the General Anti-Avoidance Rule (GAAR). If you sell and buy back intraday without taking delivery, the loss may be classified as a speculative business loss rather than a capital loss, breaking your set-off strategy.

To be safe: sell the stock, let the delivery settle, and buy it back on the next trading day. (More on this in our ₹1.25L exemption guide.)

The Advance-Tax Interplay

Most investors mistakenly treat tax-loss harvesting as a March activity. In reality it should be done quarterly to manage advance-tax outflows.

If your estimated tax liability for the year exceeds ₹10,000, you must pay advance tax in four installments: 15 June, 15 September, 15 December, and 15 March. If you booked heavy STCG in May, you owe 15% of the tax on those gains by 15 June. By harvesting losses before the advance-tax deadline, you legally reduce your estimated liability and keep that cash deployed in the market instead of handing it to the government early.

The Month-by-Month Calendar

Worked Example: A Year of Harvesting Decisions

A practical FY 2025-26 scenario:

• May 2025: you sell a stock for a ₹2,00,000 Short-Term Capital Gain (STCG).
• 10 June 2025: ahead of the 15 June advance-tax deadline, you spot an underperformer down ₹1,50,000. You sell it, booking a Short-Term Capital Loss (STCL).
• The set-off: your net taxable STCG immediately drops from ₹2,00,000 to ₹50,000.
• The result: instead of paying 20% advance tax on ₹2L, you compute tax on just ₹50K — keeping the difference invested.
• Filing on time: any STCL you can't absorb by year-end carries forward to AY 2027-28 — but only if you file your FY 2025-26 return by its Section 139(1) due date (31 July 2026). Miss it, and the unused loss expires.

Frequently Asked Questions

Can I set off an equity capital loss against my salary income?

No. Capital losses can only be set off against capital gains. They cannot reduce your salary, business, or rental income.

What happens if I file my ITR after the 31 July due date?

If you file a belated return (after the Sec 139(1) deadline), you can still set off losses against gains within the current financial year, but you completely forfeit the right to carry forward any unabsorbed losses to future years.

Can a Long-Term Capital Loss (LTCL) offset Short-Term Capital Gains (STCG)?

No. Long-Term Capital Losses can only be set off against Long-Term Capital Gains. Short-Term Capital Losses, however, can be set off against both STCG and LTCG.

Is there a limit to how much loss I can harvest in a year?

No. There is no monetary cap on the capital loss you can harvest and set off against realised capital gains in a financial year.

How does T+1 settlement affect year-end harvesting?

For listed equity sold on an exchange, the FY is fixed by the trade (contract-note) date, not the T+1 settlement date (CBDT Circular No. 704) — so a 31 March trade still counts for that FY. As a practical matter, trade a couple of business days before year-end anyway, to clear broker cut-offs and avoid any dispute over the transfer date.

Further reading

• The ₹1.25 lakh LTCG exemption — the gain-harvesting companion to this loss-harvesting guide
• What Budget 2024 changed for capital gains — why the rates are 20% and 12.5%
• F&O loss carry-forward in ITR-3 — the business-loss equivalent of this article

This article reflects rules as of FY 2025-26 (Budget 2024 amendments). Tax laws change yearly — always confirm with your CA or the income-tax portal before filing.