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54EC Bonds

54EC Bonds are for investors looking to economise capital gain taxes.

Issuers

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Rural Electrification Corporation Limited

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Power Finance Corporation

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National Highways Authority of India

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Indian Railway Finance Corporation

Salient Features of 54 EC BONDS

Tenure
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Lock-in period
of 5 Years

Rate of Interest
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5%
Per Annum

Taxability
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Taxable Interest
No TDS deducted

safety
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AAA rated Highest Safety

NON-TRANSFERABLE
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For a period of
5 Years

max. investment
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Rs. 50L
In a financial year

Who can invest in 54 EC Bonds?

Individuals
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Individuals who have sold their property and received capital gains

Members of HUF
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Hindu Undivided Family can make investments through the Karta of the family

54EC Bonds involve tax exemptions on long-term capital gains for investors who have sold their properties.
The investment should be made within six months from the date of sale. The investment for individual investors is capped at Fifty lakhs. For partnership businesses, each partner qualifies to invest Fifty lakhs.

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Why invest in 54 EC or Capital Gain Bonds?

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Investors can gain tax exemptions under section 54EC with capital gain bonds. 54EC Bonds do not allow any tax exemptions on short term capital gains tax.

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54EC Bonds are issued by PSU's notified by the government ( REC , PFC , NHAI and IRFC).

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Since the interest rate on these bonds are fixed, there is no need to keep an eye on interest rate fluctuation.

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An investor can choose the mode of issuance. The bonds can be credited in their DEMAT account or can be purchased in physical form.

BondsIndia

Investors can gain tax exemptions under section 54EC with capital gain bonds. 54EC Bonds do not allow any tax exemptions on short term capital gains tax.

BondsIndia

54EC Bonds are issued by PSU's notified by the government ( REC , PFC , NHAI and IRFC).

BondsIndia

Since the interest rate on these bonds are fixed, there is no need to keep an eye on interest rate fluctuation.

BondsIndia

An investor can choose the mode of issuance. The bonds can be credited in their DEMAT account or can be purchased in physical form.

Additional Information for Investors

As per Section 54 EC of the Income Tax Act, 1961:

  • 54EC Bonds are eligible for Long Term Capital Gain only if the assets (land,building or both) are held for a minimum period of 3 years before transfer of asset.
  • Investment Details: The 54EC Bond must be purchased within the period of six months from the date of sale/transfer of asset. The maximum investment allowed in a financial year is Rs 50 Lakhs.
  • Lock in Period: 54EC Bond have a lock in period of 5 years, thus the bond cannot be transferred within 5 years from the day of purchase.
  • Interest Rate and Taxability: The interest rate on this bond is 5% payable annually. TDS is not deducted from the interest on this bond; however it shall be included in the total income of the assessee.
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