How switching MFs to dividend option to book unrealised loss can reduce your tax bill

With only a week remaining until the end of the current financial year, now is the right time for investors to book their unrealised losses to reduce the overall tax bill. “If the loss you have booked turns into profit and you sell it within one year, you may pay more tax on the gains than what you may have saved," said Chand. Tax loss harvesting is a timely exercise of selling stocks or MFs in loss to offset it against capital gains from other profitable investments to reduce taxes. In fact, investors should conduct tax loss harvesting with any strategy they are adopting only if they can hold the MFs or stocks for at least one more year after booking the losses, say experts. “It is prudent to conduct tax loss harvesting only for those stocks or MFs for which you are bullish for the next three to four years," said Goel.