Short Term Capital Gains

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This query is : Resolved

S.S.Kumar

S.S.Kumar (Querist)

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)

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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