Short Term Capital Gain Tax on Property - Tax Implications and Calculations

Short term capital gain on property is the profit you make when you sell a house, flat, land, or building within a short time after buying it. This can feel confusing, but we will keep it very easy. You will learn what short term means, how to calculate your gain, what tax rate may apply, and small rules like TDS and advance tax. We will also see a simple number example so you can check the math by yourself.

In simple terms, your profit is the selling price minus the allowable costs. Then this profit is added to your total income for the year, and tax is charged as per your slab. There is no indexation for short term property gains. Also remember, if the sale value is high, the buyer may cut a small TDS and deposit it to the government. You can claim this amount later in your return. Read slowly, keep your bills and proofs ready, and ask a tax expert if your case has special details.

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What counts as short term for property

A property sale is short term if you sell it before completing 24 months from the date of purchase. If you sell after 24 months, it becomes a long term sale. Here we focus only on short term rules.

Formula to compute short term gain

Short term gain = Sale price (full value) − Selling expenses − Cost of purchase − Cost of improvements

Selling expenses can include broker fee, ads, and legal help linked to the sale. For short term property gains, you do not use indexation. You deduct actual costs.

Tax rate on short term property gains

Short term property gains are added to your total income and taxed at your normal slab rate for that year. Health and education cess applies as usual. Special stock market rates do not apply to property here.

TDS when the buyer pays you

If the sale value or the stamp duty value is 50 lakh rupees or more, the buyer must cut one percent TDS on the higher of the two and deposit it. This TDS will show in your tax account and you can claim credit for it while filing your return.

Advance tax rule you should know

If your total tax for the year is 10,000 rupees or more, you need to pay tax during the year in parts, called advance tax. If you make a big gain from a property sale, keep this rule in mind to avoid interest.

Can I use house reinvestment exemptions on short term gains

Popular home reinvestment benefits mainly apply to long term gains. They do not usually apply to short term property gains. Plan your cash flows with this in mind.

Set-off of losses in a simple line

Short term capital loss can be set off against any capital gains, short term or long term. If not fully used, it can be carried forward as per the time limits in law.

Easy step-by-step calculation

1. Note the sale price from the sale deed.
2. List selling costs like broker fee and legal fee tied to the sale.
3. Add up your purchase price, stamp duty, registration, and any improvement costs you actually paid.
4. Short term gain = sale price − selling costs − purchase and improvement costs.
5. Add this gain to your total income for the year.
6. Apply slab rates to compute tax and add cess.
7. Reduce any TDS cut by the buyer and any advance tax you paid. The balance is payable or refundable.

Example of Short-Term Capital Gain Tax on Property

Rahul bought a plot for 30,00,000. He paid 1,50,000 as stamp duty and 50,000 as registration. After 18 months, he sold it for 45,00,000 and paid 50,000 as broker fee.

Cost of purchase and registration = 30,00,000 + 1,50,000 + 50,000 = 32,00,000
Short term gain = 45,00,000 − 50,000 − 32,00,000 = 12,50,000

Rahul adds 12,50,000 to his total income and pays tax as per his slab. If the buyer cut one percent TDS of 45,000, Rahul will claim this as credit in his return.

Small tips to stay safe

• Keep all bills and bank statements in one file.
• Check TDS status and make sure it reflects against your PAN.
• If the total tax is high, plan advance tax dates.
• Report the gain in the correct schedule in your income tax return.
• If unsure, speak to a tax expert before the due date.