Short Term Capital Gains

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S.S.Kumar

S.S.Kumar (Querist)
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17 November 2008 As the rule stands,only LongTermCapitalGainsTax on transfer of residential properties can be allowed exemption u/s 54 provided it is reinvested in a residential property within 1year prior or 2 years following the year of transfer. I understand this is to discourage short-term speculation gains on properties and also to cater to the genuine housing needs of people.
My question is : is there no provision to avoid STC gains on transfer of property within 3 years ? Aperson may taken loan and bought the house property with a long term objective;but due to increasing EMIs and other commitments,he wishes to sell the house and use the proceeds(after discharge of loan) to buy a cheaper house property in the outskirts or some other cheaper property.Why should he be penalised by way of tax on STCG @30% even if he has no ohter property and wishes only to invest in another residential property ? Is there a way or option of proving that his objective in selling the property was not to make profits but only to cut his losses and also to reinvest in another property ?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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17 November 2008 No way out. The law says so. In the present scenerio the issue may be pointed out to the attention of the finance minister as a pre budget memorandum proposal and hope for a favourable solution by way of an amendment in the taxation law.

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