Tax-loss harvesting for Indian investors holding US stocks

Tax-loss harvesting — deliberately realizing losses on positions to offset capital gains — is a standard portfolio management technique. For Indian investors in US stocks, it's especially powerful because India has no wash-sale rule: you can sell a losing position and buy it back immediately without disqualifying the loss. This is a meaningful advantage that many Indian investors don't use.

Use the tax-loss harvesting calendar to identify which lots in your portfolio are eligible and the best order to harvest them.

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Why US stocks create unique harvesting opportunities

Your US stock portfolio is likely spread across multiple purchases over time — different lots of the same stock bought at different prices, in different financial years. Each lot has its own:

• Acquisition date (determines STCG vs LTCG)
• Acquisition cost in INR (price × exchange rate on purchase date)
• Current value in INR (price × current exchange rate)

The INR cost basis means that even if a stock has gone up in USD, a depreciated USD/INR at purchase vs a strengthened INR now could create an INR loss — or amplify an INR gain. You must track each lot separately.

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The India tax framework for capital losses

STCL (Short-Term Capital Loss): From US stocks held less than 24 months

• Can offset: STCG from any asset class, LTCG from any asset class
• Can be carried forward 8 years if not fully offset in current year

LTCL (Long-Term Capital Loss): From US stocks held 24+ months

• Can offset: LTCG only (cannot touch STCG)
• Can be carried forward 8 years

The sequencing rule: First set off losses within the same category (STCL vs STCG, LTCL vs LTCG), then cross-offset where allowed. LTCL cannot offset STCG — this is the constraint that makes holding period tracking important.

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No wash-sale rule: the India advantage

In the US, if you sell a stock at a loss and repurchase the same or substantially identical security within 30 days (before or after), the loss is disallowed under the wash-sale rule.

India has no equivalent rule. You can:

1. Sell NVDA on March 28 to realize a ₹2 lakh loss
2. Buy NVDA again on March 29
3. Claim the ₹2 lakh loss in your ITR for the financial year

This dramatically expands the harvesting toolkit. You don't need to give up exposure to the stock — just the loss realization.

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Which lots to harvest first

Not all losses are equal. Priority:

1. STCL first (held < 24 months) STCL offsets both STCG and LTCG — more flexible than LTCL. Harvest these first if you have mixed STCG and LTCG gains to offset.

2. Lots approaching the 24-month threshold A lot that has been held for 22 months and is at a loss: if you wait 2 more months, it becomes LTCL (which can only offset LTCG). If you have STCG to offset, harvest it now while it's still STCL.

3. Lots with the largest INR loss Compute losses in INR, not USD. A lot down 10% in USD may have a larger INR loss if the rupee strengthened since purchase.

4. Lots near year-end Any realization must settle by March 31. US stocks settle T+1, so execute by March 28 typically.

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The FX dimension

Each lot's cost basis is locked in INR at the exchange rate on the purchase date. This creates interesting scenarios:

Scenario A: Bought $1,000 of NVDA when USD/INR = 75 → INR cost = ₹75,000. Stock dropped 20% in USD, now worth $800. But USD/INR = 93 → current value = ₹74,400. INR loss: ₹600 (even though USD loss is $200). Here, harvesting the lot captures a small INR loss.

Scenario B: Bought $1,000 of NVDA when USD/INR = 83 → INR cost = ₹83,000. Stock up 10% in USD, now $1,100. USD/INR = 90 → current value = ₹99,000. INR gain: ₹16,000. This lot is a gain — no harvesting here.

The tax-loss harvesting calendar takes your purchase dates, purchase prices, and purchase exchange rates to compute INR lot-by-lot gain/loss and identify harvest candidates.

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Practical steps

1. Export your transaction history from your US broker (Vested, INDmoney, IBKR) — you need date, quantity, price, and USD/INR rate for each purchase
2. Compute INR cost basis per lot (quantity × price × USD/INR on purchase date)
3. Compute current INR value (quantity × current price × current USD/INR)
4. Identify loss lots — those where current value < INR cost basis
5. Check holding period — classify as STCL or LTCL
6. Match against your gains — see which losses offset which gains most efficiently
7. Execute before March 28 — sell loss lots, optionally repurchase immediately

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Carry-forward: the 8-year runway

If you have more losses than gains in a year, the excess loss carries forward for up to 8 assessment years. This means years with large unrealized losses (a market downturn) can be harvested and carried forward to offset future gains in recovery years.

Critical requirement: Losses can only be carried forward if you file your ITR on time (before the due date). If you file a belated return, carry-forward of capital losses is disallowed.

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The one-line version

India's lack of a wash-sale rule makes tax-loss harvesting unusually powerful — you can sell any losing US position and immediately repurchase it, with the loss still claimable. Use the tax-loss harvesting calendar to identify your harvest candidates before March 28 each year.