How to Save Short Term Capital Gain on Property?

How to Save Tax on Short Term Capital Gain?

• If you have earned short-term capital gains from the sale of property, you can save tax by reinvesting the gains in another residential property under Section 54F. The entire capital gains amount must be reinvested within one year before or two years after the sale of the property.
• Alternatively, you can invest the gains in constructing a residential property within three years. By doing this, the capital gains amount gets exempted from tax.
• If you're unable to reinvest the capital gains before filing your tax return, you can deposit the gains in a Capital Gain Account Scheme (CGAS) with a bank. This allows you to keep the funds safe until you are ready to reinvest them.
• You must utilize the funds for purchasing or constructing another property within the specified time frame to claim the exemption.
• If you're selling a property that's jointly owned with a family member, consider structuring the sale such that each co-owner's share of the capital gains falls below the taxable threshold. This can help in reducing the overall tax liability.
• If you have incurred short-term capital losses from other investments in the same financial year, you can adjust these losses against your short-term capital gains from property. This reduces the taxable capital gains amount.
• Utilize deductions available under Section 80C for investments such as Equity Linked Savings Schemes (ELSS), Public Provident Fund (PPF), National Savings Certificate (NSC), etc.
• These deductions can help in reducing your taxable income, thereby indirectly reducing the tax liability on capital gains.
• Transferring the property to family members such as spouse, children, or parents could potentially help in saving tax if they fall under a lower tax bracket. However, this strategy should be carefully evaluated considering the legal and tax implications.