Capital Gain Bonds
Capital gain bonds or 54EC bonds are the fixed income instruments that provide capital gains tax exemption under section 54EC to the investors. The tax liability on long-term capital gains from sale of immovable property can be reduced by purchasing 54EC bonds.
The holder of the bonds are the debtholders or creditors of the issuer. These bonds are issued by infrastructure companies that are backed by the government. Hence, the risk factor gets mitigated by buying such bonds. The capital gain bonds are redeemable before maturity. One cannot sell these bonds as they are not listed in the stock exchange. The interest is reduced to 5% p.a. from 6% p.a. and are fully taxable in your hands.
Capital Gain Bonds Helps in Tax Exemptions
1) To avail the tax-exemption the investment must be made within 6 months of the date of sale of immovable property.
2) Such investment can be redeemed only after 5 years. Before april 2018 the bonds could be redeemed within 3 years.
3) The exemption on investment is allowed only against long term capital gains on sale of immovable property (i.e. sale of land or building).
4) The exemption is available up to a maximum amount of Rs 50 lakh.
