Who can invest in Capital Gains Bonds?

Any individual or Hindu Undivided Family (HUF) liable to pay long-term capital gains tax can invest in Capital Gains Bonds

What is the lock-in period for Capital Gains Bonds?

Capital Gains Bonds come with a lock-in period of five years from the date of issuance

Who issues 54EC Capital Gain Bonds?

These bonds are typically issued by government-approved entities, such as the Indian Railways Finance Corporation (IRFC), Power Finance Corporation (PFC), and Rural Electrification Corporation (REC).

What is the maximum/minimum investment allowed in 54EC Capital Gain Bonds

The investment amount varies, and these bonds have no specific maximum or minimum investment limit.

Are 54EC Capital Gain Bonds a safe investment option?

These bonds are considered a safe investment because government-approved entities typically issue them, and the interest rate is fixed. However, like any investment, they do carry some level of risk, primarily related to interest rate fluctuations.

54EC Capital Gain Bonds

Q: What are 54EC Capital Gain Bonds?

54EC Capital Gain Bonds are a type of financial instrument issued by specified institutions in India. These bonds provide a tax-saving option for those who have incurred long-term capital gains from the sale/transfer of long-term capital assets being land, building, or both. The entire capital gain amount invested in these bonds would be exempted from tax u/s 54EC.

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By investing in 54EC Capital Gain Bonds, investors can save taxes under Section 54EC of the Income Tax Act of 1961. This section allows investors to save their Long-Term Capital Gains (LTCG) tax by reinvesting their profit from the sale of a property into these bonds within six months of the sale.

These 54EC Capital Gain Bonds help avoid large capital gains taxes on real estate sales. They also provide a secure investment option, allowing investors to contribute up to Rs. 50,00,000 in each financial year. However, it’s essential to note that although the principal amount invested helps in tax savings, the interest earned on these bonds is taxable.

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REC

(Rural Electrification Corporation)

Minimum Investment

20,000

ROI (per annum)

5.25

Rating

AAA

Interest Credit Date

30th June

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IRFC

(Indian Railway Finance Corporation)

Minimum Investment

20,000

ROI (per annum)

5.25

Rating

AAA

Interest Credit Date

15th October

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PFC

(Power Finance Corporation)

Minimum Investment

20,000

ROI (per annum)

5.25

Rating

AAA

Interest Credit Date

31st July

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REC Capital Gain Bonds

REC, a Navratna CPSE under the Ministry of Power, provides financial assistance for power infrastructure to State Electricity Boards, utilities, and private entities. Its main focus is financing rural electrification projects across the country, aiding State Electricity Boards, Government Departments, and Rural Electric Cooperatives. REC Capital Gain Bonds provide a chance to save capital gains taxes incurred from selling or transferring long-term capital assets such as land, buildings, or both.

IRFC Capital Gain Bonds

IRFC, a financing arm of the Ministry of Railways, raises funds from debt capital markets to finance Indian Railways' plan outlay partially. These funds are primarily allocated for acquiring new rolling stock assets for lease to Indian Railways and developing railway infrastructure. IRFC Capital Gain Bonds provide a chance to save capital gains taxes incurred from selling or transferring long-term capital assets such as land, buildings, or both.

PFC Capital Gain Bonds

PFC, a non-banking company, operates under the Ministry of Power's jurisdiction. Its primary function is to offer financial assistance to power sector projects and electrification endeavors across India. Additionally, it extends consultancy and advisory services to entities engaged in the power sector. PFC Capital Gain Bonds provide a chance to save capital gains taxes incurred from selling or transferring long-term capital assets such as land, buildings, or both.

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Understanding 54EC Capital Gain Bonds

It's worth noting that these bonds have a specific purpose, which is to encourage individuals to reinvest their profits from property sales and provide them with a tax-saving option. By investing in these bonds, you can defer your tax payment and potentially earn interest on your investment.
Capital Gain Bonds also come with some more benefits. They generally offer a fixed interest income, which means you can earn regular interest payments on your investment. This interest income is taxable based on your income tax rate.
Please note that when investing in 54EC Capital Gain Bonds , it's important to be aware of the lock- in period. This period refers to a specific duration of 5 years, during which you won't be suitable to withdraw your invested funds. Once this Lock-in period is over, you will admit your original investment quantity back without any fresh tax implications.
An individual or a Hindu Undivided Family (HUF) that has realized long-term capital gains from the sale of property or land is qualified to purchase 54EC Capital Gain Bonds . Generally speaking, long-term capital gains are gains from assets you own for longer than a specific time frame, such as 12 months.

Capital Gain Bond Interest Rate

Capital Gain Bonds offer investors a dependable way to earn stable returns while saving on taxes. Currently, Capital Gain Bond Interest Rate are at an attractive 5.25% per annum, making them suitable for those who are looking to maintain capital while creating fixed income. For those looking for a low-risk, tax-saving investment with a minimum investment need of Rs. 20,000, this option is available to a wide range of investors. Investors can better plan their financial goals by securing a stable interest rate, ensuring potential returns over time. Capital Gain Bonds Interest Rate give individuals the opportunity to grow their investments while maintaining financial safety, making them a prudent choice for reliable income.

What is Sec 54 EC?

SEC 54 EC bonds are also known as Capital Gain Bonds. It is an investment instrument under the Income Tax Act that permits taxpayers to save on long-term capital gains tax when they sell assets like real estate. These bonds usually have a lock-in period and offer tax benefits for those who meet the investment criteria. By utilizing this Section, taxpayers can reduce their overall tax liability and reinvest their gains in a tax-efficient manner. SEC 54 EC gives a valuable option for investors seeking to minimize tax burdens on long-term Capital gains.

Tax Benefits and Investment Opportunities of Capital Gain Bonds

Fortunately, it's crucial to keep in mind that income tax is applied to the interest you receive on these bonds. You will therefore be required to pay taxes on that income by your income tax rate when you receive the interest payments.
Investing in 54EC Capital Gain Bonds allows you to save on taxes while earning a 5.25% interest rate on Capital Gain Bonds investment. Still, it's essential to completely review the bond's terms and conditions, including the interest rate and lock- in period, before making any investment opinions

Typically, these bonds are offered by government-backed institutions such as the Rural Electrification Corporation (REC), Indian Railway Finance Corporation (IRFC), and Power Finance Corporation (PFC).

Why has the National Highways Authority of India (NHAI) decided to stop offering "54EC capital gain bonds" for the year 2022-23, and what steps are they taking regarding applications and refunds for these bonds?

The National Highways Authority of India (NHAI) has decided to stop offering a type of investment called "54EC capital gain bonds" for the year 2022-23. They've told banks not to accept any new applications or money for these bonds starting from September 3, 2022.

If someone's money was added to these bonds' accounts after September 3, 2022, NHAI will give that money back. If investors were hoping to use these bonds to avoid paying some taxes on their profits, they'll need to work with the banks or financial companies they dealt with, as NHAI won't be responsible for that part.

This decision might be because the government told NHAI to be careful about borrowing money for the next three years, so they don't end up owing too much. NHAI already has a lot of debt, around ₹3.44 trillion as of January 2022.

Visit our blog to learn about Capital Gain Bonds in India

REC (Rural Electrification Corporation)
Bank	Beneficiary Name	A/c No	IFSC Code	MICR No	Bank Address
HDFC Bank	REC Limited-54EC Bonds	00030350000584	HDFC0000003	110240001	G - 3/4 , 19 K G Marg, Surya Kiran Building, New Delhi – 110001
* Make cheque in favour of "REC Limited-54EC Bonds".

IRFC (Indian Railway Finance Corporation)
Bank	Beneficiary Name	A/c No	IFSC Code	MICR No	Bank Address
HDFC Bank	IRFC CAPITAL GAIN BONDS	57500000106078	HDFC0000003	110240001	E-19/29, 2nd Floor, Harsha Bhawan, Middle Circle, Connaught Place New Delhi – 110 001
* Make cheque in favour of "IRFC CAPITAL GAIN BONDS".

PFC (Power Finance Corporation)
Bank	Beneficiary Name	A/c No	IFSC Code	MICR No	Bank Address
HDFC Bank	PFC Capital Gain Bonds	57500000034792	HDFC0000003	110240001	209 - 214, Kailash Building, 26, Kasturba Gandhi Marg, New Delhi - 110001
* Make cheque in favour of "PFC Capital Gain Bonds".

Key Features of 54EC Capital Gain Bonds

Capital Gain Bonds Interest Rate
It offers a 5.25% rate of interest payable annually.
Investment Amount
Amount of 1 bond is 10,000/- and for PFC, IRFC, REC the minimum number of bond should be 2 that is 20,000/- for each and the maximum investment in 54EC bonds is 500 bonds amounting to Rs 50 lakhs in a financial year.
Maturity
54EC bonds come with a lock-in period of 5 years (effective from April 2018).

Transferability
The 54EC bonds cannot be transferred from one person to another at any point in time.
Tax applicable on interest
No TDS is deducted for resident individual however TDS will be deducted for NRIs. Interest is taxable as per investor income slab for all investors

Why to invest in 54EC Capital Gain Bonds?

Who are eligible to invest in these Bonds?

Documents Required for 54EC Capital Gain Bonds

Self-attested copy of PAN Card (in case of Joint application, self-attested PAN copy of all the applicants) OR Form 60 (in case the investor does not have PAN).
Cancelled Cheque leaf for payment of interest/redemption through NEFT/RTGS facility.
Other documents as applicable below:

Resident Indian

Any one of the following for address proof:

AADHAAR Card
Passport/Driving License
Identify Card issued by any Government Institution
Copy of the electricity bill or Gas connection showing residential address
Any document or communication issued by any authority of the Central Government, State Government or local bodies showing residential address
Voters Identity card
Ration Card
Bank Passbook with address and latest transactions updated

Partnership Firms

All documents (as applicable) attested by any Partner/Notary

Registration certificate, if registered
Partnership deed
Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf
Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
Telephone bill in the name of firm/partners
Copy of PAN/PAN Allotment letter

Trust & Foundations

All documents (as applicable) attested by Trustee/Notary

Certificate of registration, if registered
Power of Attorney granted to transact business on its behalf
Any officially valid document to identify the Trustees, Settlers’, Beneficiaries and those holding Power of Attorney, Founders/Managers/ Directors and their addresses
Resolution of the managing body of the Foundation/Association
Telephone bill
Copy of PAN/PAN Allotment letter (otherwise exemption certificate issued by IT Authorities)

NRIs/ Other Foreign Eligible Investors

Passport (Mandatory)
Photocopy of Cancelled Cheque (NRO Account)
Self certified address proof

Corporates

All documents (as applicable) attested by Company Secretary/Director

Certificate of incorporation and Memorandum & Articles of Association
Directors and identification of those who have authority to operate
Power of Attorney granted to its managers, officers or employees to transact business, on its behalf
Copy of PAN/PAN Allotment letter

Frequently Asked Questions (FAQs)

1. What are 54EC Capital Gain Bonds?

Government-approved bonds known as 54EC Capital Gain Bonds provide long-term capital gains tax exemptions. They are a well-liked investment choice to reduce taxes after selling real estate or other assets, and they are distributed by organizations such as REC and NHAI.

2. How do capital gain bonds help with tax savings?

You can receive a long-term capital gains tax exemption by investing in Capital Gain Bonds under Section 54EC of the Income Tax Act. Up to Rs.50 lakhs, the investment must be made within six months of the capital gain.

3. What are the interest rates on 54EC Capital Gain Bonds?

Capital Gain Bonds Interest Rates normally 5.25% per year. These bonds offer set yields with a five-year lock-in period; however, the interest collected is taxable.

4. What is the lock-in period for Capital Gain Bonds?

For Capital Gain Bonds, the investment cannot be withdrawn before the 5-year lock-in term. This guarantees long-term tax benefits.

5. What is section 54EC of Income - tax Act ?

Section 54EC of Income-tax Act provides exemption in respect of long term capital gain which arises during sale/transfer of Land or building or both.

6. Can I claim exemption under section 54EC in respect of short term capital gain ?

No, exemption under section 54EC can be claimed only in respect of long term capital gain.

7. When should I purchase 54EC bonds to claim exemption under section 54EC ?

Investor should purchase 54EC Bond within 6 months from the date of transfer of land/ building.

8. Who can claim exemption under section 54EC ?

No, exemption under section 54EC can be claimed only in respect of long term capital gain.

9. What is the maximum amount of exemption under section 54EC ?

Exemption under section 54EC is available to all assesses.

10. What is Maturity Period of the 54EC bonds ?

The amount of maximum exemption is 50 lacs per PAN and per financial year.

11. Bonds eligible for exemption under section 54EC of I-T Act

(i)RECL (Rural Electrification Corporation Ltd)(ii)IRFC (Indian Railway Finance Corporation Ltd) (iii)PFCL (Power Finance Corporation Limited).

12. What will happen if the sold property had two holders ?

If property is in the name of two people then both can avail the tax benefit of 50 lac each.

13. Is Interest earned from capital gain bonds is taxable ?

Yes, the interest earned from these bonds is taxable.

14.Where we can get TDS certificate for 54 EC bond ?

No TDS is deducted on interest from 54EC bonds.

15. can we buy 54Ec bonds online ?

Yes

16. what are the mode available to hold the bond ?

Both Physical and Demat mode is available.

17. what is the credit rating of the 54 EC bonds ?

54EC Bonds are AAA Rated secure bonds and only issued by government backed PSUs.

18. where and when will the interest of bonds credit ?

Bonds interest will credit in the bank which investor provided while filling application form.
Interest payment date of the bonds are as follows -:
(i)REC – 30th June (ii)PFC – 31st July (iii)IRFC – 15th October

Already applied?

Track your allotment status by clicking on the following links.

REC
(Rural Electrification Corporation)

IRFC
(Indian Railway Finance Corporation)

PFC
(PFC capital Gain Bonds)

Blogs

Capital gain bonds interest rates have been increased to 5.25%

Things you must know before investing in Capital Gain Bonds

How much tax you can save by investing in Capital Gain Bonds

Authorised Arrangers

RR has been an authorised broker/arranger with all issuers of Capital Gain Bonds since their inception. RR is also among the top mobilizers of capital gain bonds in India. We have a pan-India presence through our network and offices.