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Saving tax while selling a property

Mahesh (CA) (30 Points)

18 April 2012

HI,

Suppose I am having a flat which I recently purchased (say 1 year ago) and then I sell it because it does not suit my requirement. (Assume that the flat is not in a proper location or otherwise, hence I decide to sell). But I am willing to buy a new flat and stay invested. Do I have to pay STCG?

I feel it is not justified for me to be chagred STCG as I am willing to buy another property. I want to question the objective of the section. If the govt./law intends us to buy a flat (that every individual should atleast be exempted of one House Property), what is wrong in my case?

Why should I end up paying STCG? Also, is there any way to route this transaction to save tax as this is a genuine difficulty.

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3 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 18 April 2012

Yes, you will be required to pay STCG, as in case of house property exemption is allowed u/s54 only if the asset sold is an long term asset i.e. held for more than 36months.

You will have to go by law & act accordingly of what the law allows. So hold down your property for more 2 years, & then you will get exemption.

ALPESH KUMAR (SUPRITENDENT) (140 Points)
Replied 18 April 2012

You can minimize the STCL by increase your cost of improvement if u have made any addition/renovation to the assets. Elso no exemption is available on STCL.

Mahesh (CA) (30 Points)
Replied 18 April 2012

Ok. How can I mitigate my STCG tax assuming I am in the 30% tax bracket? Can I form and transfer the property to my own HUF. (Remember, there might be no STCG gains for this transaction if I (individual) transfer to my HUF at such value that will get my Indexed Cost of Acquisition equal to Sale Value). Then I (i.e. my HUF) will sell the property. Whatever STCG Gains will be accrued in the hands of the HUF. But atleast the tax on such STCG will be after availing the Exemptions Limits and also availing the slab rates, right. So I (individual) won't have to pay @ 30% but will avail the slab benefits in this transaction?

Please discuss the feasibility.