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54EC Capital Gains

Tax Exemption Bonds

Invest in 54EC Bonds
nps-white-arrow

Why invest in capital gains bonds?

Get tax exemption with capital gains through 54EC Capital Gains Tax Exemption Bonds. According to section 54EC of Income Tax 1961, an investor is allowed a deduction in respect of long-term capital gains arising on sale of an asset, if the amounts of capital gains are invested in 54EC bonds.

Download the application forms to invest in capital gains bonds

capital-gain-bonds NHAI 54EC Bonds capital-gain-bonds REC 54EC Bonds

Key Features of 54EC Bonds

ltcg

Provides exemption on
capital gains tax (LTCG)

lock-in

Lock-in of 3 years and
non- transferable

min-investment

Minimum investment amount of
10,000 and multiples

max-investment

Maximum investment limit of up to 50 lacs
in a financial year across all the
available bonds

risk-free-invest

Risk-free investment that pays 5.00%
p.a. payable annually*. The bond has the
highest credit rating of AAA by CRISIL,
CARE and FITCH

ecs

Facility of payment of interest and
redemption through ECS

bonds-form

Bonds can be held in .
Demat /Physical Form

auto-redemption

Automatic redemption after 3 Years
without surrendering bond certificates

tds

Interest is taxable but
no TDS on interest

NHAI and REC 54 EC Bonds Key Features

Bond REC 54EC NHAI 54EC
Coupon/Interest rate/Yield* 5.00% p.a. 5.00% p.a.
Rating AAA / Stable (CRISIL) AAA / Stable (CRISIL)
Tenor 5 Years 5 Years
Face Value / Issue Size per bond 10,000 / 10,000 10,000 / 10,000
Tax Status Interest is taxable Interest is taxable
Tax Benefit SEC 54 EC SEC 54 EC
Minimum Investment 20,000 (or 2 bonds) 10,000 (or 1 bonds)
Investment Maximum 500 bonds of 50 lacs in a
Financial Year across REC & NHAI		 500 bonds of 50 lacs in a
Financial Year across REC & NHAI
Mode Of Interest Annual Annual
Interest Date 30 th June 1st April
Trustee SBICAP Trustee Company Ltd., Mumbai M/s IL & FS Trust Company Ltd
Put/Call/Premature Encashment Bullet repayment at the time of Maturity Bullet repayment at the time of Maturity
More Details REC 54 EC Bond Details NHAI 54EC Bond Details
* The interest rate change every financial year, this is for FY2021

FAQ’s

Q : Who can invest in 54EC Bonds?

Resident individuals, Hindu Undivided Families (HUF), non-resident Indians (NRIs) and approved institutions are allowed to invest in 54EC Bonds and avail the benefit of long term capital gains exemption as per the Income Tax Section 54EC.

Q : When to invest in Capital Gains Tax Exemption Bonds?

Within six months of occurrence of Capital Gains.

Q : What is the interest rate in 54EC Bonds?

The interest rate on 54EC Bonds is revised every year by bond issuer. Currently, an interest rate (coupon rate) of 6% p.a. is being offered on this bond (FY2015).

Q : Are 54EC Bonds safe to invest?

NHAI and REC bonds have the highest credit ratings from India’s top rating companies indicating highest level of safety in an investment:
  • AAA Stable rating by Crisil Ltd
  • “CARE AAA” by CARE
  • AAA (Ind)/(Affirmed) by Fitch
In addition these are issued by government of India’s entities REC and NHAI and hence are very safe and come with very minimum risk.

Q : Why invest in 54EC Bonds?

To save tax on capital gains. According to the income-tax rules, if you’ve made long-term capital gains (LTCG) by selling a property you held for three years, you have to pay a 20% tax. However, you can avoid paying this tax by investing in bonds specified under section 54EC of the Income-tax Act.

Q : What are the provisions to avail the capital gains tax exemption?

As per provisions of Income Tax Act, 1961, any long term capital gains arising from sale 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 sale in eligible bonds
  • Such investment must be held for 3 years in the eligible bonds
  • 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.
All FAQ'smd-double-arrow

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