Long-term capital gain is the gain that is derived out of a sale of an asset (Land or Building) that has been held for more than two years. You can invest the gain in certain specified bonds to claim tax exemption within 6 months of the date of sale of the asset. 54EC bonds, or capital gains bonds, are one of the best way to save long-term capital gain tax arising out of sale a capital asset.
The maximum limit for investing in 54EC bonds is Rs. 50,00,000. The eligible bonds under Section 54EC are REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd) , NHAI (National Highways Authority of India) and IRFC (Indian Railways Finance Corporation Limited).
How Capital Gains Bonds Help in Tax Exemptions?
These are the following conditions which need to be met to avail tax exemptions under Section 54EC:
- The investment amount should originate from capital gains arising out of the sale of assets such as land or building or both
- Investment amount should not exceed Rs. 50 Lakh. In case the capital gain was shared by partners in a real estate business, each partner is entitled to a maximum limit of Rs. 50 Lakh.
- Investment in NHAI, REC,PFC and IRFC bonds should be made within 6 months from the date of sale of the property or before filing their income tax returns.
Listed below are the Key features of Capital Gains Bonds:
| Issue Details |
On-going |
| Tenure |
5 years |
| Rate of Interest |
5.00% p.a. payable annually |
| Taxation |
Interest is taxable although no TDS is deducted |
| Redemption |
Automatic Redemption after 5 Years |
| Rating |
AAA rated |
| Mode of Holding |
Physical or Demat |
| Min Investment |
1 Bonds (Rs. 10,000) |
| Max Investment |
500 Bonds (Rs. 50,00,000 Lacs) |
RBI FLOATING RATE SAVINGS BOND
SPECIFIC CONDITIONS ON PREMATURE WITHDRAWAL FOR SENIOR CITIZENS
Minimum lock-in period from the date of issue as per Investor age bracket :
| Age Bracket |
Lock-in Period |
| 60 to 70 years |
6 years |
| 70 to 80 years |
5 years |
| Age of 80 years & above |
4 years |
