Section 54EC- Deduction on LTCG Through Capital Gain Bonds

Are you looking to sell your property but are worried about paying tax for gains? We tell you how to save on taxes on any long-term capital gain. A long-term capital gain is any revenue that you get from the sale of an asset. According to the Income Tax Act, you are liable to pay tax for such gains. However, you can reduce the liability of these taxes.Invest in section 54EC bonds, also commonly known as capital gain bonds, to avail tax deductions in the future.

No, you can’t redeem the investment before the maturity of bonds i.e. before how to make a healthy homemade protein shake 5 years from the date of investment. If you redeem bonds before their maturity, the exemption granted under Section 54EC will not be granted and you will have to pay LTCG tax on the original capital gains amount. We assume 7.5 per cent to strike a balance between risk (higher yield but higher risk) and reward (lower yield but lower risk). Taxation at 30 per cent means a net return of approximately 5.25 per cent.

UGRO Capital Limited- A Look into Bond Public Issue

We do not sell or rent your contact information to third parties. You can apply for the 54 EC bonds offline (Physical) and online. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. These bonds are highly secure, sovereign in nature with a AAA rating. Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department.

Bonds Eligible for Exemption Under Section 54EC of the Income Tax Act

The lock-in period for 54EC Bonds is 5 years, during what is an invoice which the invested amount cannot be redeemed or transferred. The amount should be invested within a period of 6 months from the date of transfer. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.

1. You can buy these bonds online through the respective company’s website or contact a broker.
2. Yes, the exemption under Section 54EC can be claimed multiple times related to the same property, subject to the overall limit of Rs.50 lakhs per financial year.
3. These bonds have five years lock-in period and interest payable annually at the rate of 5.75 percent.
4. Schedule a call with an investment expert to get complete help regarding investment in 54EC Bonds in India.
5. The exemption claimed under section 54EC would be withdrawn, in case the long term specified asset is transferred or converted into the money before the expiry of the period of three years or five years, as the case may be.

Capital Gains Bonds for Tax Exemption under Section 54EC

However, the interest gained is taxable and must be mentioned during the tax return filing. 54EC bonds are specifically meant for investors earning long-term capital gains and would like to get exemption on these gains. Investors who purchase capital gains bonds are known as debt holders. 54EC bonds are issued by government backed infrastructure companies, which reduces the risk involved in purchasing such bonds. A popular option for saving long-term capital gains tax on sale of property is section 54EC bonds. Investing in these bonds can help you make gains of up to ₹50 lakh per financial year from capital gains tax.

Capital gain bonds come with zero risks of repayment and interest. Your annual income from interest earned on these bonds is guaranteed by the government of India. If you are selling your property and are looking for ways to avoid having to pay taxes, look no further than the 54EC bonds. Investors need to make an why are sales a credit investment in 54EC Bonds within 6 months from the date of the sale of their asset generating capital gains.

The minimum investment allowed is Rs. 10,000 and maximum is Rs. 50 lakh. 54EC bonds are issued for a lock-in period of 5 years and are non-transferable at any point of time. There is a negative perception about perpetual bonds after the YES Bank fiasco. The risk factors that got highlighted after the YES Bank AT1 write-off have always existed, but came into action and hit investors. Having said that, there are front line banks such as SBI, HDFC Bank and the like that are worth investing in. You can apply through your broker if you are interested in investing in 54EC bonds.

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. 54EC bonds allow Indian investors to save taxes on long-term capital gains by investing in government-backed entities like PFC, IRFC, and REC. These bonds have a lock-in period of 5 years with interest rates around 5-6% per annum. Investors can compare them with FDs, PPF, and Debt Mutual Funds for returns.

Against ₹59.38 lakh in case of 54EC bonds, ₹40 lakh invested at 5.25 per cent grows to ₹51.6 lakh after five years. Though somewhat higher than the ₹49.25 lakh from tax-free bonds, this is lower than the ₹59 lakh from 54EC, bonds making the latter a better option. The assessee has invested the amount of capital gain (wholly or partly) in the long term specified assets.