The taxpayer will have to pay tax on the capital gains accordingly. Any individuals, including Non-Resident Indians, and HUFs can apply for these bonds to get capital gains tax exemption. However, you need to buy these bonds within six months of selling property. NRIs can buy capital gains bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC), etc. to save tax on their long-term capital gains from the sale of their property in India.
Investing in Bonds: Stability for Secure Financial Growth
Hence the break-even rate for ₹40 lakh to outperform ₹50 lakh over five years, at 3.5 per cent net of tax, is 8.24 per cent net of tax. Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts how to calculate straight line depreciation suggest the best funds and you can get high returns by investing directly or through SIP.
54EC Bonds or Capital Gains Bonds is one such instrument to consider and know about, which will get you an exemption from the capital gains tax that you might have incurred on a long term asset provided certain conditions are met. Most importantly the taxpayer will have to, within 6 months of sale or transfer, reinvest the proceeds from the sale of a long term asset into a 54EC bond. Investors can enjoy tax exemptions under section 54EC of the Income Tax by purchasing these bonds. However, interest earned through investment in these bonds is taxable as per your income tax slab. However, you will not be able to get the tax exemption benefits under section 54EC.
How investment in Capital Gain Bonds Works?
We shall Call/SMS you for a period of 12 months.Brokerage will not exceed SEBI prescribed limits Disclaimer Privacy Policy Any Grievances related the aforesaid brokerage scheme will not be entertained on exchange platform. Trusted by over 2 Cr+ clients, Angel One is one of India’s leading retail full-service broking houses. We offer a wide range of innovative services, including online trading and investing, advisory, margin trading facility, algorithmic trading, smart orders, etc. Our Super App is a powerhouse of cutting-edge tools such as basket orders, GTT orders, SmartAPI, advanced charts and others that help you navigate capital markets like a pro. Do note that there is a cap on the capital gain that can be reinvested in a 54EC Bond, and the limit has a ceiling of Rs.50 lakh. 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.
Maximizing Returns: A Comprehensive Guide to 54EC Bonds for Smart Investors
The interest rate and policy with respect of intuit 1120s 54EC bonds are subject to change from time to time, depending on government regulations and changing economic conditions. Investors are advised to keep themselves informed through the Notices periodically made available by PFC, IRFC, and REC. 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.
- No, you can’t redeem the investment before the maturity of bonds i.e. before 5 years from the date of investment.
- 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.
- Section 54EC bonds, also known as Capital gain bonds are fixed income instruments which provide capital gains tax exemption under section 54EC to the investors.
- It is difficult for bonds as it will be possible only for a bond with inferior credit quality against a AAA rated PSU one.
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Hence your return, net of tax, is approximately 3.5 per cent. As against this, if you go for option (b), you pay tax on capital gains, which is taxable at 20 per cent if we ignore surcharge and cess, for simplicity. Subsequent to paying the tax of ₹10 lakh, what remains with you for investment is ₹40 lakh. The 54ec capital gain bonds are tax exemption bonds, allow you to avoid paying tax on capital gains arising from selling property. These bonds continue to be tax exempted, and no tax is deducted at the source.
Q- What happens if a taxpayer invests in capital gains bonds after 6 months from the date of earning the capital gain?
It important to noted best practices for writing nonprofit bylaws here that in case the assessee has taken any loan or advances against the long term specified asset, then, the same would be deemed as converted into money on the date on which such loan or advances is taken. As shown in example, assessee has tried to take double benefit of section 54EC by investing the amount in two different financial years but within six month after the date of transfer. But this planning is nullified by the Second Proviso u/s 54EC. BondsIndia is a brand name of Launchpad Fintech Private Limited, an e-business platform for Fixed Income securities that uses technology as a means to provide quality & real-time financial solutions to users. As per the Finance Act (no.2) 2014 amendment, you can’t invest more than Rs. 50 lakh in the capital bonds under Section 54EC. You can consider investing under section 54F or 54 to invest more than Rs. 50,00,000.
