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.

This page focuses specifically on US stock holdings. For a broader guide covering Indian equity TLH as well, see the tax-loss harvesting India guide.

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

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.

No wash-sale rule: India's key advantage over US investors

The US wash-sale rule (IRC Section 1091) disallows a capital loss if you sell a security and repurchase a "substantially identical" security within 30 days before or after the sale.

The wash-sale rule is a US tax provision. It is enforced through the US tax return — specifically Schedule D of Form 1040. Indian residents investing via LRS are Non-Resident Aliens (NRAs) for US tax purposes. NRAs do not file US tax returns for capital gains from stock sales (no US Schedule D). Without a US tax filing obligation, the wash-sale rule has no mechanism to apply to you.

This means you can:

1. Sell Meta at a loss on March 28
2. Buy Meta again on March 29 (or even later the same day)
3. Claim the full loss in your Indian ITR for that financial year

The loss is valid. No 30-day wait. No substitute security required.

US investors by contrast must either wait 30 days (missing market recovery) or buy a "substantially identical" substitute — which the IRS has never clearly defined, creating uncertainty even for ETF swaps (e.g., VOO for SPY, same index but different fund). That uncertainty drives the entire TLH fund industry. You have none of that complexity.

The India tax framework for capital losses on US stocks

Under Sections 70–74 of the Income Tax Act:

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 assessment 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 assessment years

The sequencing rule (Section 71): Within the same year, first set off losses of the same type (STCL vs STCG first, LTCL vs LTCG first), then cross-offset where allowed. LTCL cannot offset STCG in any circumstance — this is the constraint that makes holding period tracking important.

Critical: To carry forward losses to future years, you must file your ITR by the original due date (not the belated return deadline). If you miss the July 31 due date (for non-audit cases), you lose the right to carry forward that year's capital losses.

US-specific: identifying loss lots in your broker

Unlike Indian brokers where demat statements show INR cost basis, US brokers show cost basis in USD. You must convert to INR to determine the actual gain or loss for Indian tax purposes.

Fidelity (for RSU and ESPP shares)

• Go to Accounts → Positions → select the stock → Cost Basis
• Fidelity shows USD lot-level cost basis with acquisition dates
• Filter to see only lots with unrealized losses (USD)
• Export to CSV for INR conversion

E*Trade / Morgan Stanley (common for tech RSUs)

• Portfolio → Unrealized Gain/Loss tab
• Shows lot-by-lot USD gain/loss sorted by holding period
• Can filter "Losses only" to identify harvest candidates
• Download tax lot detail for ITR computation

Rovia / Vested / INDmoney

• These platforms often show INR-equivalent gain/loss directly, accounting for the exchange rate
• Check the "P&L" or "Gain/Loss" section for lot-level detail
• Some platforms show approximate INR gain/loss — cross-check with actual purchase exchange rates for precision

The conversion you need for each lot:

• INR cost basis = purchase quantity × USD price × USD/INR on purchase date (RBI reference rate)
• INR current value = quantity × current USD price × current USD/INR

Specific US stock examples: harvesting a loss in Meta, offsetting a gain in Apple

Portfolio situation (March 2026):

• 10 shares Meta, bought December 2024 at $540 (USD/INR: ₹84) → INR cost = ₹4,53,600 (STCL lot, 15 months held)
• 5 shares Apple, bought August 2023 at $190 (USD/INR: ₹83) → INR cost = ₹78,850 (LTCG lot, 31 months held)
• Current: Meta = $480, Apple = $240; USD/INR = ₹86

Current values:

• Meta: 10 × $480 × ₹86 = ₹4,12,800 → STCL = ₹4,53,600 − ₹4,12,800 = ₹40,800 STCL
• Apple: 5 × $240 × ₹86 = ₹1,03,200 → LTCG = ₹1,03,200 − ₹78,850 = ₹24,350 LTCG

Harvesting strategy:

1. Sell 10 shares Meta on March 28 → realise ₹40,800 STCL
2. ₹40,800 STCL can offset: (a) the ₹24,350 LTCG from Apple (fully offset), plus (b) ₹16,450 remaining STCL can offset any other STCG you have, or be carried forward 8 years
3. Repurchase 10 shares Meta on March 29 → maintain position, fresh lot starts STCG clock
4. Net tax saving on Apple LTCG: ₹24,350 × 12.5% = ₹3,044 saved

The same-day repurchase strategy: if you want to avoid even one day of market exposure, some platforms allow selling and rebuying within the same trading session. Confirm execution timing with your broker — T+1 settlement means the sold lot settles separately from the new purchase regardless.

The 8-year loss carry-forward under Sections 70–74

The carry-forward provision is especially powerful for US stock investors who experience large losses during market downturns.

Scenario: In FY 2022-23 (the tech crash year), you realised ₹5 lakh in STCL on US tech stocks with no offsetting gains. You carry forward ₹5 lakh STCL.

In FY 2024-25 (recovery year): you realise ₹3 lakh STCG on US stocks. Your carried-forward STCL offsets the entire ₹3 lakh STCG → no capital gains tax in FY 2024-25. Remaining carry-forward: ₹2 lakh STCL (can still be used through FY 2030-31).

Filing requirement for carry-forward: The ITR must be filed on time each year — both the year the loss was incurred and each subsequent year. Use Schedule CFL (Carry Forward of Losses) in ITR-2 to report the balance of carried-forward losses.

Form CG in ITR-2: reporting US stock gains and losses

All capital transactions from US stocks go into Schedule CG (Capital Gains) in ITR-2:

• Part B: Short-term capital gains from other than STT-paid assets (this covers US stocks, which are foreign listed and not STT-paid)
• Part C: Long-term capital gains under Section 112 (US stocks held 24+ months at 12.5%)

For each lot sold during the year, enter:

• Full value of consideration (INR at RBI rate on sale date)
• Cost of acquisition (INR at RBI rate on purchase date)
• Gain or loss

Losses appear as negative entries. The schedule auto-calculates net STCG/LTCG after set-off.

Carry-forward losses from prior years appear pre-filled in ITR-2 if you used the same ITR in prior years. Verify the amounts match your Schedule CFL from prior year's ITR.

Timing: harvest before March 31

Any realisation must settle by March 31. US stocks settle T+1, so execute by March 28 typically (to allow for weekends, public holidays, and time zone differences between India and US markets).

Checklist for March harvest:

• Identify all loss lots (sorted by INR loss magnitude)
• Determine STCL vs LTCL for each lot
• Match against gains you've already realised this financial year
• Execute sale by March 27–28
• Optionally repurchase immediately
• Note new purchase date and price for the replacement lot

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.

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.

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 under Sections 70–74 of the ITA. Use the tax-loss harvesting calendar to identify your harvest candidates before March 28 each year, file ITR on time to preserve carry-forward rights, and report losses in Schedule CG of ITR-2.