Capital gain bonds interest rates have been increased to 5.25%

With effect from 1st April , 2023, the rate of interest on Capital Gain Bonds has been increased from 5% to 5.25%. This move is aimed at encouraging more individuals to invest in these bonds, which offer a tax-saving avenue for those who have made capital gains.

Capital Gain Bonds are issued by the Rural Electrification Corporation (REC) , Power Finance Corporation (PFC) and Indian Railways Finance Corporation (IRFC). These bonds are specifically meant for individuals who have made long-term capital gains from the sale of a property or asset, and are looking to save on tax.

The interest earned on these bonds is fully taxable, but the amount invested in these bonds is eligible for deduction under Section 54EC of the Income Tax Act, 1961. This means that individuals can save on tax by investing in these bonds, up to a maximum of Rs. 50 lakhs per financial year.

With the recent increase in the rate of interest on Capital Gain Bonds, these bonds have become an even more attractive investment option for individuals looking to save on tax. The increase in interest rates is also expected to generate more interest among investors, which could lead to a higher demand for these bonds. It's important to note that these bonds have a lock-in period of 5 years, which means that individuals cannot redeem them before the end of this period. Additionally, the interest earned on these bonds is paid out annually and is taxable as per the individual's income tax slab.

In conclusion, the increase in the rate of interest on Capital Gain Bonds is a welcome move and is expected to encourage more individuals to invest in these bonds. With their tax-saving benefits and higher interest rates, these bonds are an attractive investment option for those who have made long-term capital gains and are looking to save on tax.