Generally, 54EC bonds are issued by infrastructure companies that have support from the government. Thus, the risk quotient is very low in purchasing these bonds. However, these bonds cannot be sold since they are not listed on the stock exchange. Since these bonds are used to receive exemption on capital gains from sale of an asset held for a long period, you can invest in 54EC bonds if you have received capital gain from selling a property. However, you will not be able to get the tax exemption benefits under section 54EC. The income earned from the long-term capital gains will be taxable from the year you obtained the loan.
- Income tax section 54EC discusses the benefits of Capital Gain Bonds.
- Under Section 54EC of the Income Tax Act, a capital gains bond serves as a financial instrument that offers individuals a tax-saving advantage on their long-term capital gains.
- These capital gain bonds are issued by selected entities such as the Rural Electricity Corporation (REC) or the National Highways Authority of India (NHAI).
- Short-term capital gains cannot be used to avail of the tax benefits of these bonds.
- RR has been an authorised broker/arranger with all issuers of Capital Gain Bonds since their inception.
Last but not the least, it may be noted that these Sec. 54EC bonds may be used to save tax on any long-term capital gain and not necessarily only from sale of property. For example, apart from property, sale of say non-equity mutual funds, bonds, debentures, gold, jewellery or even gold ETFs etc. may result in long-term capital gains. These gains can be saved from taxes by investing the amount in the 54EC bonds as discussed. Selling your capital assets for a generous amount of profit is surely a moment of joy, but it also comes with capital gains taxes.
Bonds eligible for exemption under section 54EC of the Income Tax Act
The maturity date of the 54 EC bonds is five years from the date of issuance. Understanding the step-by-step process or investing guide for 54 ec bonds with RKFS is crucial before making any investments. Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.
- 54EC bonds are issued by government backed infrastructure companies, which reduces the risk involved in purchasing such bonds.
- After completing all the above-mentioned formalities, your investment in these bonds would be complete.
- In case of the untimely death of a bondholder, the issuing entity shall recognise the administrator of the deceased.
- 54EC bonds can be issued only by specific government-backed companies.
- Section 54EC of the Income Tax Act provides a tax-saving opportunity for individuals selling long-term immovable property.
These bonds are issued by government-approved entities and offer tax benefits under Section 54EC of the Income Tax Act, 1961. By investing in these bonds, investors can claim deductions on long-term capital gains, which can help reduce their tax liability. Capital gain bonds, also known as 54EC bonds, are tax exempt bonds that allow investors to enjoy tax exemptions, under section 54EC, on capital gains made from property sale. Investors can purchase 54EC bonds to reduce the long-term capital gains tax on income from sale of immovable property. These bonds are financial instruments that are issued by certain government entities or organizations for the purpose of providing a tax-saving investment option to investors.
Sec 54 EC – Capital Gains Bonds
Hindu Undivided Family can make investments through the Karta of the family. The amount of maximum exemption is 50 lacs per PAN and per financial year. Individuals, Hindu Undivided Families (HUFs), and corporate entities are eligible to invest in 54EC Bonds.
Lock-In Period of the Capital Gain Bond
You can apply for the 54 EC bonds offline (Physical) and online. Schedule a call with an investment expert to get complete help regarding investment in 54EC Bonds in India. Capital Gain Bonds are mentioned under Income Tax section 54EC.
What are the benefits of investing in Section 54EC bonds?
If you have received capital gain from selling a property, you can invest in these bonds to avoid paying capital gain tax. You can receive tax exemption under IT section 54EC by investing in these bonds. However, the interest earned is taxable as per the income tax slab.
If you have any doubts or queries and want specialized advice from experts at SBNRI, contact us using the button below. The maximum investment amount related to these bonds is ₹ 50 lakh in every financial year. Moreover, in terms of the number, you can purchase a maximum of 500 bonds. With just over a few months left in the current tax year, many of us would already be doing year end tax planning and sussing out options to invest to either gain a tax deduction or tax exemption.
Who can issue Capital Gain Bonds?
This is available for verification via a financial advisor or on the issuer’s website. Investors may purchase 54 EC bonds in physical or demat form, depending on their preference. Additionally, purchasing 54EC Bonds can aid in portfolio diversification for investors. Investors can distribute their risk and lessen the impact of market fluctuations by including this kind of investment in their portfolio. The amount should be invested within a period of 6 months from the date of transfer. Since the interest rate on these bonds are fixed, there is no need to keep an eye on interest rate fluctuation.