New Delhi, June 11 -- Tax-loss harvesting has emerged as a popular strategy among mutual fund investors looking to reduce their tax liability. But as with most tax-planning strategies, the benefits depend heavily on how it is executed. Done without a clear framework, tax-loss harvesting can undermine broader portfolio objectives and long-term investment goals.

This strategy involves selling a mutual fund investment that is trading below its purchase price and booking the loss. The realised loss can then be used to offset eligible capital gains arising from other investments. While the approach can improve tax efficiency, experts caution that tax considerations should not drive investment decisions.

According to Gautham Aditya V, Researc...