How can I avoid paying excessive taxes on my stock market returns in India?

To avoid paying excessive taxes on stock market returns in India, use tax-saving strategies like holding stocks for more than one year to benefit from lower long-term capital gains tax, investing through tax-efficient instruments like ELSS funds, and using tax-loss harvesting to offset gains.

1. Hold Stocks for More Than One Year

Stocks held for more than one year qualify for **long-term capital gains tax (LTCG)**, which is lower than short-term tax rates.

• Short-term capital gains (STCG) tax is 15% for stocks sold within one year
• LTCG is taxed at 10% but only on gains exceeding ₹1 lakh
• Holding investments longer helps save tax

2. Use Tax-Loss Harvesting

Tax-loss harvesting helps offset taxable gains by selling loss-making stocks strategically.

• Sell underperforming stocks to offset capital gains tax
• Reinvest in similar assets to maintain portfolio balance
• Use this strategy before the financial year ends

3. Invest in Tax-Saving Instruments Like ELSS

Equity-Linked Savings Schemes (ELSS) allow tax deductions up to ₹1.5 lakh under **Section 80C**.

• ELSS funds have a mandatory lock-in of three years
• They offer both tax savings and potential market returns
• Ideal for long-term tax efficiency

4. Use Indexation Benefits for Debt Mutual Funds

Debt mutual funds held for more than three years qualify for **indexation benefits**, reducing taxable capital gains.

• Indexation adjusts the purchase price for inflation
• Lower taxable gains mean lower tax liability
• Best suited for long-term debt investors

5. Conclusion

To reduce tax liability on stock market returns, investors in India should use tax-efficient strategies like holding stocks for long-term gains, leveraging tax-loss harvesting, investing in ELSS funds, and utilizing indexation benefits for debt funds. **Open your demat account with Angel One today and maximize your tax savings!**