Section 54EC bonds, also known as Capital gain bonds are fixed income instruments which provide capital gains tax exemption under section 54EC to the investors. As investors, we all seek profitable avenues to grow our wealth while ensuring sound financial planning. When it comes to selling assets like property or stocks, capital gains are often a significant part of the equation. While these gains are a testament to our successful investments, they also come with a tax liability that can impact our overall returns. The 54ec capital gain bonds are tax exemption bonds, allow you to avoid paying tax on capital gains arising from selling property.

Then he would time the sale for transaction between December and March of any year. In this way, the six month period overlapped two financial years which would in turn enable him the mysteries of (investor) to double the investible amount to Rs 1 crore. However, budget 2014 has plugged this loophole and now a maximum of Rs 50 lakh only may be invested for any transaction.

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Additionally, the capital gains that are invested in these bonds must be long-term capital gains, which are gains from the sale of an asset that was held for more than 2 years. Investing in 54EC Bonds can also help diversify an investor’s portfolio. By adding this type of investment to their portfolio, investors can spread their risk and reduce the impact of market fluctuations. However, it’s important to note that while 54EC Bonds offer tax benefits and a guaranteed return, they may not be suitable for everyone. Investors should carefully consider their financial goals, risk tolerance, and investment horizon before investing in these bonds. 54EC are capital gain bonds, that is used to receive the capital gain tax exemption.

• Nevertheless, there is a way to avoid this tax by investing the profits into specific assets.
• However, the land or building that has been sold to result in a capital gain should be located in India.
• In this article, we will discuss various dimensions of these bonds and how they can help you in reducing your tax liabilities.
• 19[Capital gain not to be charged on investment in certain bonds.

As the name goes by, these bonds are issued under Section 54EC of the Income Tax Act 1961. Only bonds issued by the National Highway Authority of India, Rural Electrification Limited, and Power Finance Corporation Limited are eligible to fall under this category. Do note that there is a cap on the capital gain that can be reinvested in a 54EC Bond, and the limit has a ceiling of Rs.50 lakh. Check to see if the bonds are still available for investment after you have selected the issuer.

Get Access to Capital Gain Bonds

You can apply through your broker if you are interested in investing in 54EC bonds. If you want to purchase, you must do it within 6 months of transferring the asset. The minimum amount to invest is Rs 10,000 and maximum Rs 50 lakhs.

Fill out the Application Form

Any individuals, including Non-Resident Indians, and HUFs can apply for these bonds to get capital gains tax exemption. However, you need to buy these bonds within six months of selling property. 54 EC bonds are one of the most popular measures to save tax accrued on long-term capital gains. However, it is important that you invest in these bonds within the stipulated time frame to avail the tax benefits. These capital gain bonds are issued by selected entities such as the Rural Electricity Corporation (REC) or the National Highways Authority of India (NHAI). The maturity period for these bonds is fixed at three years, and they are non-transferable.

Investment Amount

These are REC (Rural Electrification Corporation), PFC (Power Finance Corporation), and IRFC (Indian Railways Finance Corporation. There is no wealth tax or need for TDS to be deducted from interest income in 54EC bonds, and only Bond interest is taxable in the case of 54EC bonds. If you make a physical investment, you will get a bond certificate from the issuer. You will need to present the certificate when it comes time for maturity, so handle it with care. 54 EC Bonds are only available for purchase by individuals and Hindu Undivided Families (HUFs).

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Clear can also help you in getting your business registered for Goods & Services Tax Law. All categories of persons are eligible to avail exemption benefit under section 54EC of the Income Tax Act. 54EC Bonds are issued by PSU’s notified by the government ( REC , PFC , NHAI and IRFC).

However, interest rates are subject to revision by the respective Companies/Government from time to time. In case of the untimely death of a bondholder, the issuing entity shall recognise the administrator of the deceased. The company will consider their legal heir and transfer those bonds in the legal heir’s name. After completing all the above-mentioned formalities, your investment in these bonds would be complete. Before we go into further details about reinvesting in 54EC bonds, let’s look at what section 54EC of the Income Tax Act talks about. 54EC bonds can be issued only by specific government-backed companies.