Ritvik Sabharwal holds 70% of his Rs 2 crore net worth in his employer's listed shares, bought at an average Rs 180 against a market price of Rs 1,050. Plan a three-year diversification that balances tax on gains against concentration risk.

Sell Rs 50 lakh in year one, Rs 30 lakh in year two and Rs 20 lakh in year three, taking the holding from 70% to about 21% of net worth for about Rs 9.9 lakh of tax. Spreading the sales saves little tax, so front-load them to cut the risk early. The tax is a known cost; the loss if the shares halve falls from Rs 70 lakh to Rs 20 lakh, and that is the unknown cost the plan exists to shrink.

A family that keeps all its savings in the shop that also pays every salary has one bad year standing between it and real trouble. Ritvik's wealth and his income depend on the same company, so a fall in the shares would likely arrive alongside a threat to his job. If the shares halved, he would lose Rs 70 lakh, 35% of his net worth, and a single company's shares can fall that far on one bad contract or governance event. That is concentration riskThe risk that comes from having a large share of wealth in one holding, so that one company’s bad news damages the whole portfolio., and it is the risk the plan exists to shrink.

Every rupee sold is 82.9% gain, because his cost is Rs 180 against a price of Rs 1,050. Selling Rs 1 crore at once creates a gain of Rs 82.9 lakh and, at the assumed 12.5% above the Rs 1.25 lakh exemption, tax of about Rs 10.20 lakh. Spread over three years, the tax is about Rs 9.89 lakh. The saving from waiting is only two extra years of the exemption, about Rs 0.31 lakh, because the rate does not change with the size of the sale. So tax is not a reason to go slowly.

Because the tax is almost the same either way, while the risk falls faster. Selling in equal thirds of about Rs 33 lakh costs about Rs 9.89 lakh, the same as the front-loaded plan, but leaves more in the shares during years one and two. When waiting saves almost nothing, the plan should remove the most risk first. After year one, the loss if the shares halve drops from Rs 70 lakh to Rs 45 lakh; after year three it is Rs 20 lakh, about 11% of his net worth.

Three reasons, and it is fair to tell him so. He knows the company, and some of his conviction may be well founded. Keeping 20% leaves him a stake in the upside he cares about. And a plan he will actually follow is worth more than a perfect plan he abandons after the first sale. The proceeds should go into diversified funds that hold little or none of his employer or its sector, so the diversification is real, and the sales must fall inside the company's open trading windows, or follow a pre-agreed trading plan if he is an insider; confirm the rules that apply to him.

Tax is a known cost; concentration risk is an unknown one, and the plan trades Rs 9.9 lakh of certain cost for a much smaller possible loss. If the shares rise in the meantime, the tax rises with the gain, but so does the amount at risk, which is an argument for keeping to the schedule rather than pausing. The tax rate, exemption and flat share price are assumptions; rerun the numbers on the rules in force and his actual sale prices.