Do You know what is 54EC Bonds

Do You know what is 54EC Bonds

When individuals or businesses sell their capital assets they can accrue capital gains if the asset is sold for a profit or capital loss if the purchase price exceeds the sale price. Capital assets could include land, building etc which if held for more than 36 months or 24 months or 12 months depending on the asset, are called as Long term capital assets. When you accrue capital gain on the sale of such capital assets, the capital gain on such sale is subject to taxation. Long-term capital gain (LTCG) is taxable at 20% (with indexation) or 12.5 % without Indexation for real estate. This is where 54 EC Bonds come into picture to save your hard earned money from being heavily taxed! 54 EC Bonds are also called as Capital Gain Bonds. If a person invests the capital gains accrued from a sale of an asset, into capital gain bonds, they would be eligible for a tax exemption on such gains.

What are 54EC Bonds?

54EC Bonds are investment options that act as a tax saving mechanism! They are a type of bond which are part of fixed income instruments. When you invest in capital gain bonds or 54 EC Bonds, you would be eligible for a tax exemption.

These bonds are tax saving Bonds, the name of which is derived from Section 54EC of the Income Tax Act, 1961. Under this section, an investor need not pay any tax on any long-term capital gains arising on the sale of any property, if the amount accrued as of capital gains is invested in certain specified bonds. Capital gain bonds are one of the various eligible 54 EC investment options. These bonds are issued by certain permitted Public Sector Units which means these entities are backed by the government.

List of Capital Gain Bonds

REC Capital Gains Tax Exemption Bonds-Series – XX

PFC Capital Gain Tax Exemption Bonds –Series X

IRFC Capital Gain Tax Exemption Bonds –Series IX

HUDCO Capital Gains Tax Exemption Bonds - Series I

 Who issues 54 EC bonds

Only a few Public Sector Undertakings (PSUs) are permitted to issue 54 EC Bonds.

Following are a few frequent issuers :

REC - Rural Electrification Corporation Limited (REC 54EC Bonds)

PFC - Power Finance Corporation Limited

IRFC - Indian Railways Finance Corporation Limited

HUDCO - Housing & Urban Development Corporation Limited

Features of 54 EC Bonds

Here are a few features to keep in mind when you invest in 54 EC Bonds

Investment amount

The minimum investment amount is INR 20,000 (2 bonds) and the maximum amount is INR 50 Lakhs in a financial year (500 bonds)

Interest

54EC Bonds have an interest rate of 5.25% per annum currently which is payable annually. This income is taxable although no TDS is deducted.

Tenor

54 EC bonds have a maturity of 5 years from the date of issuance.

Lock-in

These bonds have a lock-in of 5 years from the date you invest which are then automatically redeemed at par at maturity

Holding

54 EC bonds can be held in your existing demat accounts or in physical form based on your preference.

Time Limit to invest

Investment in 54 EC Bonds should be within six months from the capital asset sale to avail the exemption

Exemption

Exemption is claimed only for profits from property sales comprising land and buildings, both residential and commercial

Benefits of 54EC Bonds

Safe and secure

Capital gain bonds 54 EC are a safe investment option as they are backed by the government and therefore carry minimal risk.

Tax saving option

Capital gain bonds are tax exempted which makes it a great tax saving investment option that can also be reinvested.

High Rating

54 EC Bonds have a rating of AAA as these bonds are backed by the government. This makes these bonds a safe investment option.

Additional income

Investors can earn 5.25% interest annually on their investment.

If you want to buy 54EC Capital Gain Bonds to save Tax , Contact us.