This is tax loss harvesting.
The legal, repeatable way for Indian residents to keep more of their foreign equity gains — without giving up market exposure.
What is tax loss harvesting?
If you hold US RSUs or foreign equity, some of your lots are almost always underwater. Tax loss harvesting is the act of selling those losing lots and immediately rebuying the same shares — locking in a tax-deductible loss while keeping your market exposure intact.
The realized loss goes into a "loss bank" that can offset future capital gains — STCL against any gain, LTCL against long-term gains only. Indian law explicitly allows this strategy and, unlike the US, has no wash-sale rule to navigate around. Played across years, it can cut your final tax bill by 30–60%.
How tax loss harvesting works
Three steps. Plain English. Then we'll show you the math.
Questions you're probably about to ask
Short answers, with the actual statute references where they help.
Yes — and it's explicitly provided for under Sections 70 and 71 of the Income Tax Act. Realized capital losses can offset capital gains in the same year, and unused losses carry forward for eight assessment years.
For listed foreign equity (US stocks, RSUs, ESPPs), you book the gain or loss when you sell — not when shares vest. Sell at a loss on Schwab, E*TRADE, or any US brokerage, rebuy immediately, and the loss is fully recognized for Indian tax. You'll declare these on Schedule CG and Schedule FA in your ITR-2 or ITR-3 filing.