After all booking loss is not such a bad thing. The Income-tax act allows one to set off the short-term losses against short-term gains and long-term gains. How does it work?

If a stock bought for 1 lakh is sold at 80K within 1 year then the loss of Rs. 20K (1 lakh - 80K) is allowed to be set off against short term and long term gains generated from any other asset

Why 1 year?? Equity is classified as short-term if held for less than 1 year. The Income-tax Act has defined the time horizon for various assets to identify when those assets be defined as long term and short term

For eg - Debt mutual funds are classified as short-term if held for less than 3 years.

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