Scope for reducing tax liability on stcg

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sakshi (Querist)
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19 March 2014 One of my client has STCG on sale of property Rs. 48.10 lacs. Is there any scope for reduction of tax liability on above STCG except deductions of chapter VI.

the details are as below:
Sale consideration: 55,00,000.00
Less: Cost of acquisition 6,90,000.00
STCG 48,10,000.00

How can i reduce it to the maximum?

Ankit

Ankit (Expert)
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19 March 2014 Sakshi,

since it is STCG, unfortunately you can do nothing about it....you have t pay tax on it...

only if it were LTCG, you could use section 54

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sakshi

sakshi (Querist)
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19 March 2014 Thanks for your reply...

But what i am asking about tax planning... Can't i claim illegal/temporary construction (which i have not constructed at all actually)as a cost of improvement of the said property??

Please suggest..

Ankit

Ankit (Expert)
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19 March 2014 See sakshi....illegally, there are many more things you could do...

but then, in property transactions, it is not advisable, since the SC is greater than 50,00,000 TDS will also get deducted, plus there will be a AIR reporting...

so scrutiny may come..and at that time, you should not get into unnecessary troubles..

and BTW thats tax evasion..not planning...

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Ankit

Ankit (Expert)
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19 March 2014 you are welcome sakshi,,incase you have any more doubts, pl feel free to ask

sakshi

sakshi (Querist)
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19 March 2014 Thanks again..

Exactly.. as what you said..."there are many more things you could do"

what are those "many more things"??

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 To reduce tax liability on **Short-Term Capital Gains (STCG)** from sale of property, your options are quite limited compared to Long-Term Capital Gains (LTCG), because:

* STCG on property (held less than 24 months) is added to your **normal income** and taxed at your slab rate.
* There are **no exemptions under Section 54, 54F, etc.** for STCG.
* Chapter VI deductions (like 80C, 80D) can reduce overall taxable income, but not the STCG amount itself.

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### Potential ways to reduce tax liability on STCG:

1. **Check if property qualifies as LTCG**

* Property held for more than 24 months is LTCG and eligible for exemptions under sections like 54 or 54F on reinvestment.

2. **Adjust cost of acquisition and other expenses properly**

* Ensure all expenses related to acquisition and sale (stamp duty, registration fees, brokerage) are correctly added to cost of acquisition or deducted from sale consideration to reduce gains.
* If any improvement expenses (capital expenditures) are there, add them to cost of acquisition.

3. **Set off losses (if any)**

* If client has any **short-term or long-term capital losses** from other assets, they can be set off against this STCG.

4. **Reduce taxable income with other deductions**

* Utilize **Chapter VI-A deductions** like 80C (LIC, PPF), 80D (medical insurance), 80E (education loan interest) to reduce total taxable income, thus lowering the overall tax burden.

5. **Consider restructuring sale (if still possible)**

* For example, if the property is held jointly, gains can be split among co-owners, reducing tax liability individually.

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### Summary:

* Direct exemption on STCG from property is **not available**.
* Focus on **maximizing cost and improvement expenses**, **setting off losses**, and **tax planning via deductions**.
* Also confirm the **period of holding** to check if LTCG benefits apply.

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If you want, I can help you draft a checklist or compute exact tax savings by applying these steps. Would you like that?

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