Capital Gain Bonds

What are Capital Gain Bonds ?

Capital Gain Bonds or 54EC Bonds are the fixed income instruments that provide capital gains tax exemption under section 54EC to the investors. The tax liability on long-term capital gains from sale of immovable property can be reduced by purchasing 54EC bonds. The owner of the bonds are the debtholders or creditors of the issuer. These bonds are issued by infrastructure companies that are backed by the government. Hence, the risk factor is negligible under such bonds.

Rural Electrification Corporation Limited or REC bonds,
National Highway Authority of India or NHAI bonds,
Power Finance Corporation Limited or PFC bonds,
Indian Railway Finance Corporation Limited or IRFC bonds.

Key facts to avail the LTCG exemption by investment in Capital Gain Bonds:

To avail the tax-exemption the investment must be made within 6 months of the date of sale of immovable property.
Before April 2018 the bonds could be redeemed within 3 years but presently such investment can be redeemed only after 5 years.
The exemption on investment is allowed only against long term capital gains on sale of immovable property (i.e. sale of land or building).
The exemption is available up to a maximum amount of Rs 50 lakh

Provisions of Section 54EC

As per provisions of Income Tax Act, 1961, any long term capital gains arising from transfer of any capital asset would be exempt from tax under section 54EC of the Act if:

The entire capital gain realized is invested within 6 months of the date of transfer in eligible bonds.
Such investment is held for 3 years.
To avail of capital gain exemption, the bonds so acquired cannot be transferred or converted into money or any loan or advance can be taken on security of such bond within 3 years from date of acquisition else, the benefit would be withdrawn.
If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax.

Capital Gain Bond Forms

Types of Capital Gain Bonds

Equity Funds

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Bond Funds

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Hybrid Funds

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Benefits Of Capital Gain Bonds

Safety

Issued by the public sector companies, eliminates the risk and insures payment on time.

Return Rate

Capital Gain Bond interest rate is 5.75% and it is the fixed income instrument for tax exemption.

TDS Exemption

TDS on the investment in capital gain bonds are exempted while tax is applied on your interest earned.

Top Rated

Capital Gain Bonds are AAA rated by agencies like ICRA, CRISIL, India Ratings & Research Pvt. Ltd.

Tax Exemptions

Capital Gain Bonds are the main instruments for tax savings on the long run.

Different Forms

Capital Gain Bonds are available in physical as well as demat form for your investments.

Why Through Us?

Tax Experts

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