Section 54EC- Deduction on LTCG Through Capital Gain Bonds

These bonds have the highest AAA rating from agencies such Care, ICRA and Crisil which means highest creditworthiness and lowest default risk. Attention Investor, Prevent unauthorised transactions in your account. Receive information of your transactions directly from Stock Exchange / Depositories on your mobile/email at the end of the day. The lock-in period for 54EC Bonds is 5 years, during which the invested amount cannot be redeemed or transferred. Before we go into further details about reinvesting in 54EC bonds, let’s look at what section 54EC of the Income Tax Act talks about. Capital gain bonds are safe, secure and offer a decent rate of interest.

A Review of NIDO Home Finance Limited’s Bond Public Issue

1. Let’s delve into the features, benefits, and real-world examples to understand why investors are turning to these bonds.
2. The tax on long term capital gain (LTCG) is 20 per cent can be a hefty one.
3. These bonds are suitable for tax-saving and conservative investors seeking safety.
4. According to Crisil, PFC and REC have dominant positions in power sector financing space and have strategic importance due to Government of India (GoI) ownership.
5. Individuals, as well as corporations, can sell their bonds in this market and generate capital gains.

In Union Budget 2017, the Finance Minister talked about introducing newer unemployment disqualifications bonds to boost the market. However, in the 2018 Budget, the minister proposed an increase in the lock-in period for 54EC Bonds to raise the demand for this type of financial instrument. The proposal was finally institutionalised in the Union Budget 2019, making the tenure period 5 years for capital gains bonds in 2019. Selling capital assets and making a profit will result in taxation on those profits as capital gains. Nevertheless, there is a way to avoid this tax by investing the profits into specific assets. We will be discussing one such exemption given under Section 54EC in detail.

Key Features of 54EC Bonds

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. For offline application, the applicant must submit cheque/DD/NEFT/RTGS along with the application and the necessary annexures, documents to the collecting bank. In addition to these traditional modes, applicants can also invest through fiscal quarter brokers, and platforms such as IndiaBonds.

What are the Key Features of Capital Gains Bonds Under Section 54EC?

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law. Yes, investors have the flexibility to hold 54EC Bonds in Demat accounts or in physical form based on their preference.

Maximizing Returns: A Comprehensive Guide to 54EC Bonds for Smart Investors

Investments in bonds can also be done to save on long-term capital gains tax. According to Section 54EC of the Income Tax Act of 1961, investors can shield their long-term capital gains from taxation by investing in specific 54EC Bonds within six months of selling assets like property or stocks. These bonds, issued by government-backed infrastructure companies, carry a lower risk profile, earning them AAA ratings from credit rating agencies like CRISIL, ICRA, and CARE. These 54EC bonds make a good investment for long-term capital gains tax-saving in India. The interest rate may not compare with certain other investment options, but it often stands well with the leverage of tax exemption benefits.

In the Budget 2024 FM Nirmala Sitharaman has proposed changes in the tax rate on short-term capital gains from 15% to 20%. The Indian Financial market can be said to be in its nascent stage compared to the equity share market. It is because these bonds are only desirable when an individual prefers to save through tax exemption when they generate capital gains from selling a property. Capital Gain Bonds, especially 54EC Bonds, serve as an ideal destination for funds when investors are averse to investing in another property or capital asset. This choice helps them save on long-term capital gain taxes, which can be substantial for assets like property and jewelry. Whether you call them Capital Gains Bonds or 54EC Bonds, these investment tools provide a unique opportunity to secure your long-term gains while enjoying tax exemptions.

But not many of us might be aware of an investment in a financial instrument which provides an exemption from capital gains tax  (up to a cap of Rs.50 lakh). These are bond for capital gain tax exemption, and so individuals and HUFs can apply. If you want to invest in 54EC bonds, you need to do it within six months of selling the property. You can purchase these bonds after receiving a capital gain from selling a property. These bonds have five years lock-in period and interest payable annually at the rate of 5.75 percent.

The interest paid on bookkeeping for inventory transactions this bond will be taxable in the hands of the investor. The tenure of these bonds is 5 years and cannot be redeemed before this period, signalling poor liquidity for the bond holder in the interim. According to Income Tax Act, the investment in these bonds must be made within six months of the sale of the property in order to be eligible for LTCG tax exemption.

Categorised in: Bookkeeping

This post was written by vladeta