How much gain can you book tax free this year?

Deliberately selling enough of a long-term equity holding each year to realise gains up to the annual exemption, then immediately buying back the same amount. No tax is due because the gain is within the exemption, and the cost base of the rebought units is higher than before.

Over a long holding this removes the gain a slice at a time instead of leaving it all to be taxed at the end. The allowance resets every year and cannot be carried forward, so an unused one is permanently lost.

More than ₹1.25 lakh, and usually a great deal more. Only the gain portion of a redemption counts against the exemption, and the rest is your own capital coming back.

On the defaults here, a ₹16 lakh holding that cost ₹10 lakh is 37.5% gain, so realising ₹1,25,000 of gain means redeeming about ₹3,33,000. Someone who redeems exactly ₹1.25 lakh uses less than half the allowance and never realises the rest is still there.

Yes. It is using an exemption Parliament wrote into the statute, in the way it operates. There is no general anti-avoidance concern with realising a gain within an exemption and reinvesting, and India has no wash-sale rule that disallows an immediate repurchase of the same equity holding. It is entirely ordinary, and the only reason it is uncommon is that most people do not know the allowance exists.

Up to ₹15,625 of tax a year, being 12.5% of the ₹1.25 lakh exemption, and it compounds over a long holding because each year’s harvest permanently removes gain from the eventual bill. On a holding kept for a decade the total is often over a lakh. It will not change your life, and it is free, and the alternative is letting the allowance lapse fourteen times.

Any time before 31 March, and there is a case for doing it early rather than in the last week. Doing it in, say, January leaves time to check the transaction actually settled and to correct it if the amount was wrong, and avoids the risk of a redemption placed on 30 March settling into the next financial year. The one thing that does not work is remembering in April.

Yes, and it needs more care. A SIP creates a new lot every month, each with its own purchase date, and only lots older than twelve months qualify as long term. Redemption is oldest first, so a modest harvest usually draws only on qualifying units, but a large one can reach into recent lots and realise short-term gains at 20%. Take the capital gains statement from your registrar before acting rather than estimating.

The mirror operation, and useful in a different situation. Selling a holding that is down realises a loss you can set against gains you have booked, with short-term losses available against both kinds of gain and long-term losses only against long-term gains. Unabsorbed losses carry forward eight years provided the return is filed on time. In a year when you have realised a large gain, this is worth more than the exemption is.

A few honest ones. If your total equity gains will never approach the exemption anyway, there is nothing to harvest. If the fund charges an exit load on the units you would redeem, that cost can exceed the tax saved. And if you are likely to sell the whole holding within a year or two, the benefit is small because the gain was about to be realised regardless. It is most valuable on a large holding you intend to keep for a long time.