The section 54EC of the Income-tax Act, 1961 allows a deduction in respect of long term capital gains arising from sell/transfer of any long term capital asset (for example, any immovable property, jewellery or shares) which was held for a period exceeding three years. In case of shares, the holding period should be 1 year. This section is specifically for the investment in some bonds which are meant for people who have made some long term capital gains, and would like to save taxes out of such gain.

Let’s see the salient features of 54EC Bonds

1. Investment into these bonds save long term capital gains
2. It is locked in for 3 years
3. Demat account is not compulsory to invest in these bonds
4. Currently REC and NHAI issue such bonds
5. Rate of interest from these bonds are 6% pa and paid out every year. Now it’s at 5.25% pa w.e.f December 1, 2016
6. TDS on the interest payable will not be deducted
7. Remember the yearly interest earned is taxable under the head of income from other source
8. The maximum cap for the investment is Rs. 50 lacs
9. The Bonds are non-transferable, non-negotiable and cannot be offered as a security for any loan or advance

What you need to know before investing in 54EC Bonds?
The benefit under section 54EC can be availed of only if there is an income from a capital asset, being long-term in nature.

You can invest in such bonds only up to the extent of capital gains and not the sales consideration. Remember the upper limit for investment is up to Rs. 50lacs.

Example; If a property has been held for more than 3 years and sold for Rs. 80 lacs whose indexed value of acquisition is Rs. 35 lacs, thus the long term capital gain is Rs. 45lacs. In this case the maximum investment into 54EC bond can only be Rs. 45 lacs and neither Rs. 50 lacs as given upper limit nor the sale value i.e. Rs. 80 lacs. In other case, if the property would have been sold for Rs. 1 crore having the same indexed value of acquisition i.e. Rs. 35lacs then the maximum amount that can be invested in the said 54EC bond will be Rs. 50 lcas even though the long term capital gains amount is Rs. 65 lacs.

Since the investment into 54EC bond is locked for 3 years, you cannot sell or transfer the bonds. If you do so, the amount of capital gains which were given as exemption will considered to be taxable long term capital gains in the same financial year in which the sell/transfer took place.

Who is issuing 54EC Bonds?
Currently there are two corporations which have been notified by the Government of India as being eligible for issue of these bonds are National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC).

Who can invest in 54EC Bonds?
Any person (including NRI out of NRO account on a non-repatriable basis) and Hindu undivided family (HUF) through its Karta can make investments into these two bonds issued by NHAI and REC. This can also be invested by partnerships, companies, financial institutions, insurance companies, provident funds, superannuation funds, gratuity funds, mutual funds, FIIs, trusts authorized to invest bonds ect.

Where can I buy these Bonds?
Most of the bank branches sell these bonds. For the respective bond application forms you can download either from NHAI or REC website.

You can also talk to your local bank branch for the availability of these bonds or alternatively you can find the list of mobilisors & collecting bank branches in the websites of these issuers.

Know all about 54EC Bonds to Save Long Capital Gains Tax

134 thoughts on “Know all about 54EC Bonds to Save Long Capital Gains Tax

  • December 28, 2012 at 10:43 AM
    Permalink

    can i invest 80lacs in these bonds as i get two financial years

    Reply
    • December 28, 2012 at 2:28 PM
      Permalink

      Hi Trevor,
      You can invest max Rs. 50 lacs in these bonds only. Do remember such investments should be done within 180 days from the date of sell/transfer takes place. Also the lock in period for the bond is 3 years.

      Reply
      • March 16, 2015 at 2:21 PM
        Permalink

        Hi Soubhagya,

        I need a clarification the principal amount invested in capital gains bond can be used by the person post maturity with out any worries of IT act. kindly confirm

        Regards
        pradeep

        Reply
        • March 16, 2015 at 11:54 PM
          Permalink

          No worries Pradeep. Reason is while investing in it you have already declared in return filing if it is used as saving capital gains tax. I guess this is what you are asking for.

          Reply
          • March 24, 2015 at 1:03 PM
            Permalink

            You are right Mr.Soubhagya. Just need a clarification is it i need to deposit the amount in capital bond within 31st Mar’15 or within 31st July’15.

            Also, i have opened a Capital gain account in SBI and transferred some amount for construction purpose. Is it before closing the CAGS account. I need to assess the same from Income tax officer. Kindly confirm

    • August 26, 2014 at 10:57 AM
      Permalink

      Yes, you can. If your property is sold after 1st October of the year, you can invest Rs. 50 Lacs in the same financial year and remaining Rs. 30 Lacs (80-50) in the next financial year, provided you have invested within 180 days from the date of sale.

      Example: Sale of property on 10/10/2013 and long term capital gain is of Rs. 80 Lacs.

      You can invest Rs. 50 lacs in between 10/10/2013 to 31/03/2014 and remaining Rs. 30 lacs in between 01/04/2014 to 10/04/2014.

      Reply
  • February 11, 2013 at 4:44 PM
    Permalink

    Can owner invest in 54 EC bond in jointly with family members (Whose PAN may be available or not) in different bonds?

    Reply
    • February 12, 2013 at 6:37 PM
      Permalink

      Yes, but it depends if the family member has the share/ownership with the asset. Remember, the max limit specified u/s 54EC. This means if you have already crossed the max limit, you can’t invest more and the gain that has to be invested to claim benefits has to be as per the proportion of ownership only.

      Reply
  • February 25, 2013 at 4:16 AM
    Permalink

    Hi,

    Can you please advise if there is any risk involved in investing in such bonds? For example, can the price of these bonds go up or down, so that at end of maturity, I can get less than I invested? Also, has the credit rating ever gone down from AAA and if it did in the future, would it affect the amount I received back after investing?
    Many thanks for your help.
    Regards,
    CR

    Reply
    • February 25, 2013 at 8:15 AM
      Permalink

      Hi CR,
      Every investment have certain amount of risks and in the same way these bonds also carry certain risks such as, default risk, inflation risk, credit risk, interest rate risk etc. Default risk says that the bond’s issuer will be unable to pay the committed interest or principal on the bond in a timely manner & this answers your query about any change in ratings. Yes the credit rating may change from time to time basis the rating agency reports. In inflation risk as the rate of price increases in the economy decrease the returns associated with the bond. At the same time interest rate risk, which is a common risk to any bond i.e. when the interest rates rise the bond prices will fall.

      Reply
      • May 21, 2013 at 10:03 AM
        Permalink

        Hi Soubhagya,
        Are you sure about that? I am still a novoice at the terms of investing, but from what I understand NHAI bonds are “AAA” rated bullet bonds i.e. the issuer (National Highway Authority of India) absorbs the interest rate risk. Hence, they have low yield 6% as opposed to other bonds. The only risk is defaulting on the payments but it is CRISIL AAA rated.

        Reply
        • May 21, 2013 at 11:08 AM
          Permalink

          Hi Gumnam,

          You have a logical point here, but the concerns with regards to their ratings, interest rate depends on various risk as indicated above.

          Reply
  • April 14, 2013 at 11:36 AM
    Permalink

    After maturity of these bonds, will the amount be taxable?

    Reply
    • April 14, 2013 at 6:10 PM
      Permalink

      Hi Anurag,
      Interest on such bonds are payable annually. The interest earned on these bonds are taxable and you will need to pay tax on the interest income as advance tax.

      Reply
  • April 30, 2013 at 11:09 AM
    Permalink

    After receiving entire capital gains after 3 years into NHAI bonds. will the gain be taxable or do i have to buy a property in oder to save tax…

    Reply
    • April 30, 2013 at 11:55 AM
      Permalink

      Hi Vicky,

      After three years you pay tax only on the interest amount generated from the investment into these bonds. Entire investment amount (the capital gain amount that invested) will not be taxed.

      Reply
  • May 23, 2013 at 10:44 AM
    Permalink

    is it adviable to buy capital gain bonds in the name of the first holder ( the LTCG being from sale of shares ) ? ( from tax dept . prespective ) , or joint holding is alright ?

    Reply
    • May 23, 2013 at 11:18 AM
      Permalink

      Hi KPV,
      You can buy with a joint holding mode, but remember the investments made in these bonds during any financial year shall not in aggregate exceed Rs. 50 lacs.

      Reply
    • May 23, 2013 at 11:26 AM
      Permalink

      Please specify what kind of share it is

      Reply
  • June 11, 2013 at 5:45 PM
    Permalink

    If Capital Gain amt is >Rs50 lac and period of 180 days falls in two financial yera (if assets sold in Jan2013 So if Investment is made in 2013-14 and 2014-15 before Filling of ROI and due date of 180 days amounting to Rs 1CR can the deduction of 1 Cr is available?
    and If CG is to non resident can he invest in 54Ec?

    Reply
    • June 11, 2013 at 6:37 PM
      Permalink

      Hi Amit,

      Under the provision of section 54EC the capital gain amount should be invested (max Rs. 50Lacs) in a financial year within 180 days from the date of actual sale/transfer. As per your case just after approx 90days next financial year arise in that case assessee again get the eligibility to have 54EC invested max amount of Rs. 50Lacs that means complete Rs. 1cr at max, There are many such cases where assessee have claimed Rs. 1cr deduction.

      Answer to your second question. Yes NRIs are also eligible to invest (out of NRO account on a non-repatriable basis) in 54EC bonds.

      Reply
      • July 12, 2013 at 7:55 PM
        Permalink

        If the IT does not accept this interpretation, what will happen with the second 50 lakhs bond?

        Reply
        • July 12, 2013 at 9:27 PM
          Permalink

          Hi Bala,

          This has to be justified to the Assessing Officer. Such benefits cannot always be taken just for the sake of the difference of time of arisal of a capital gains.

          Reply
      • March 15, 2014 at 10:48 PM
        Permalink

        Dear Mr. Patra,
        If LTCG is > 50 lakhs, say 80 lakhs and I invest 50 lakhs in one FY and the balance 30 lakhs LTCG in the next FY (both within 180 days of the sale). While filing returns for the current FY , my LTCG is 80 lakhs but my exemption under sec 54 EC is only 50 lakhs for this FY. How do I take into consideration my investment of 30 lakhs in the next FY while submitting returns of the current FY

        Reply
        • March 19, 2014 at 6:59 PM
          Permalink

          Hi Hemanta,

          In some of the cases, such scenarios of capital gains are exempted (basis case to case). But I don’t think there is option given while filing IT returns where you can show investment already done u/s 54EC for the comming assessment year while filing retruns for the current assessment year.

          It may not be an easy walk to get the exemption. For this your assessing officer needs to get explained.

          Reply
  • July 5, 2013 at 5:38 PM
    Permalink

    Hi,
    We have invested 40 lakhs in REC capital gains bonds. It’s been 4 months since we invested. But now due to financial reasons we want only 10 lakhs back? We want to invest the 10 lakhs in a housing property. Can we do this and still get the tax benefit i.e. not have to pay 20% tax on the 10 lakhs?

    Reply
    • July 5, 2013 at 6:13 PM
      Permalink

      Hi Kumar,

      Such bonds have got 3 years lock in period, so you can not take this out before the lock in period is over.

      Reply
      • July 5, 2013 at 6:20 PM
        Permalink

        Well you did mention something about selling or transferring them. How can this be done?

        Reply
        • July 6, 2013 at 10:16 AM
          Permalink

          Kumar, for redemption of these bonds allotted in physical form, surrender will be discharged by original bond certificate alongwith request letter. In case of Demat/Electronic form, such redemption will happen through a surrender copy of delivery instruction duly acknowledged by DP alongwith request letter or online.

          Reply
          • July 12, 2013 at 12:44 PM
            Permalink

            If I have invested in 54EC bonds, which ITR form should I use and which sheet inside the ITR form should I show this in?

          • July 12, 2013 at 7:25 PM
            Permalink

            Hi Vinay,

            You need to use ITR-2 for this. And the said investment amount can be mentioned in the CG-OS sheet’s section “d” of the Long Term Capital Gain deductions.

  • July 17, 2013 at 7:47 PM
    Permalink

    hi, after the completion of three years lock in period , the capital which we have invested should be invested only in buying a property or can be used for any purpose…please clarify

    Reply
    • July 18, 2013 at 4:51 PM
      Permalink

      Hi Pavan,

      On completion of 3 years, any accumulated interest needs to be taxed as per your tax slab. But don’t worry about the principal portion (the original capital gains that invested), you can enjoy with the money 🙂 nobody should say anything.

      Reply
      • September 26, 2013 at 12:07 AM
        Permalink

        Hi,
        After the bond lock period of 3 years can the entire amount be brought back to NRE account? What is the procedure?

        Reply
        • September 26, 2013 at 11:10 AM
          Permalink

          Hi Gopal,

          It has to be credited into NRO account (if you are an NRI), then you need to follow the procedure as specified by RBI to repatriate the funds.

          Reply
  • July 18, 2013 at 11:21 PM
    Permalink

    Hi, I would like to know below details with regard to 54EC bonds,
    >> What are the documents required to invest in 54EC bonds.
    >> The property is in my dads name and can the investment be made in my name (individual).
    >> Is it mandatory for all the documents have to be signed by a gazetted officer.
    >> How many days would it take for the whole process of investing in 54EC and receiving the bonds and acknowledgements.
    >> Would all the applications be accepted or some be rejected.
    >> If rejected, what are the chances and how many days would it take for them to notify us on the status of the application.
    >> If rejected, when would i receive the amount back and how many days would take. How they make the payment (online transfer to our account or cheque or DD would be sent to our mailing address)
    >> Can I do the ITR form filling and submitting online.
    >> What is the tax rate for the interest yielded for Indian citizen and NRI/NRO/NRE.

    Reply
    • July 24, 2013 at 1:41 PM
      Permalink

      Hi Vinay,

      Find the answer in sequence of your queries,
      >> You can find the required documents in the application form
      >> In such case you father will not be able to get the exemption
      >> This has to be checked with the issuer or distributor of the bonds
      >> Same as above answer
      >> Same as above answer
      >> Same as above answer
      >> While filing you can declare (fill) the investment
      >> As per tax slab

      Reply
  • September 9, 2013 at 11:53 AM
    Permalink

    Hi
    One question regarding 54EC bonds. Say land was sold for 80L and the long term indexed capital gains is coming to 54.7L. If one were to put 50L in 54EC bonds and is ready to pay tax for remaining amount, how does he/she calculate the tax? Is it:
    a) Reduce 50L from the Capital gains of 54.7L , ie, Capital gains is 4.7L and taxed @ 20%. Tax comes to around 90K…..or……
    b) The uninvested amount is 30L (80L-50L). The capital gains come to 30/80 of 54.7L, ie, around 20L and taxed @ 20%. Tax comes to around 4L

    Which is the right way to calculate the ltcg tax?

    Thanks
    Sumesh

    Reply
    • September 9, 2013 at 10:18 PM
      Permalink

      Hi Sumesh,
      As per section 54F any gains arise from the sale of any long term asset other than residential property (you have sold Land) shall be exempt in full, if the entire net sales consideration is invested. But so far you have invested only Rs. 50Lacs 54EC bond as max available limit in any FY. On a pro-rata basis this 50Lacs of investment will be considered as Rs. Rs. 34.19Lac out of actual gains of Rs. 54.7Lacs which you mentioned. Fyr Rs. 34.19Lacs = (54.7/80*50).

      Now taxable capital gains will be Rs. 20.52Lacs i.e. (Rs. 54.70-Rs.34.19) and tax will be approx Rs. 4.23Lacs

      Reply
      • November 28, 2013 at 8:49 PM
        Permalink

        Hi Soubhagya,
        Need more clarity on the prorata basis calculation.
        How can Sumesh get entire LTCG exemption.
        Sorry for being ignorant.

        Reply
        • November 29, 2013 at 12:42 AM
          Permalink

          Hi Ambuja,

          In case of Sumesh, he has to invest entire sale proceeds to save capital gain tax. Fyi, it was a land sale which is other than house property.

          I have explained the concept of prorata in the calculation given to Sumesh. Pls go through the same.

          Read Section 54F of IT Act for more details: http://ow.ly/rh9ks

          Reply
  • September 13, 2013 at 11:59 AM
    Permalink

    What happens if I invest in these bonds before receiving the sale proceeds? Will the investment qualify for deduction?

    Reply
    • September 13, 2013 at 10:53 PM
      Permalink

      Hi Anwar,

      It’s not eligible. You can recall the statement under the provision which says “Under the rules, long-term capital gains tax may be saved by investing in Sec 54EC bonds within six months of the date of sale”, but it has no where stated in terms as “prior to the date of sale”.

      Reply
      • February 13, 2015 at 8:46 AM
        Permalink

        I understand that the bonds are deemed to be allotted at the end of the month (if I apply on April 12th, I will get them on April 30th). So if I sold a property on October 20th and apply for 54 EC on April 12th, I will get the bonds only on 30 th April (after 6 months from sale of porperty). So which is the date considered for calculating 6 months- date of allotment or date of application?

        Reply
        • February 13, 2015 at 9:17 PM
          Permalink

          Hi Jayadevan,

          It should be date of allotment.

          Reply
  • September 18, 2013 at 10:55 AM
    Permalink

    1. what are the eligible bonds as of today.
    2. what is the time limit to invest the capital gain in the bonds
    3. if not in bonds – what are all the other exemptions like bank deposits available
    4. what is the procedure to withdraw in case of emergency or in case of death

    Reply
    • September 18, 2013 at 11:07 AM
      Permalink

      Hi Lalitha,

      1. You can look at NHAI or REC Bonds
      2. As stated in the article you need to invest within six months from the date of sale of capital asset.
      3. Fyi, Bank FD will note save you from tax due to LTCG.
      4. It’s locked for 3 years.

      Reply
  • September 24, 2013 at 10:54 PM
    Permalink

    Hi,
    Thanks for a very informative article. I recently sold a residential house which was in joint name of me and my wife. To claim the tax exemption on LTCG, should I purchase the bonds in joint name of me and my wife? Please note that its only me who will claim the tax exemption and not my wife.

    I’d appreciate if you can shed some more light on the topic of joint ownership and any implications it might have for capital gains tax exemption.

    Thanks and Regards,
    Atul

    Reply
    • September 25, 2013 at 11:23 AM
      Permalink

      Hi Atul,

      Since the ownership was in joint name, obviously tax liabilities out of capital gains will be jointly as per the proportion of ownership. In that case you can only invest to the extend of your portion of capital gains amount subject to max Rs. 50Lacs. You can buy this only your name also.

      Reply
  • October 8, 2013 at 7:17 PM
    Permalink

    One of my relative sold a property for Rs.80 lacs, which amount was received by a cheque and was deposited in his savings account. But after the clearance of the cheque his account was blocked by IT department since Sep,2011. After a long period, last month he got the clearance from the IT dept. But now he can’t withdraw any amount from his account. The Bank officials saying that the amount is converted to CGAS. Is there any possibilities to reclaim that amount? If possible, then give me any ideas to revoke the funds.

    Reply
    • October 13, 2013 at 1:22 PM
      Permalink

      Hi Nikhil,

      Under Capital Gains Scheme account the tax payers can avail of the benefit of exemption from Capital Gains, if the amount of Capital Gains or the net consideration is deposited in the bank on or before the due date of filling the return of income. If the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires.

      Your relative needs to provide the proofs of IT returns and tax paid if any or investment of LTCG amount in new property to the bank so that the amount in CGS account can be released to him else he will be taxed on the gain amount plus applicable penalty and interest for non-payment of Tax.

      Reply
      • December 19, 2013 at 3:16 PM
        Permalink

        Hi
        Reason for locking a/c as above is still not clear. Planning sales .
        1. House – Joint name (self & wife ) Purchase – 5 L from income and loan of self , Sale 30 L , Indexed 10 Lac.
        2.Can we take 30 L in two / three cheques ( two different dates ) and deposit in saving a/c of wife and how to treat 20 L to insulate it from any such (even inadvertent) misadventure by ITD .
        2. What will happen to 20L in saving account if not invested in bond or purchase . Will 20 L get added to income of wife in FY 2014-15.

        Reply
        • December 19, 2013 at 5:27 PM
          Permalink

          Hi Rajnish,

          It doesn’t matter where you park the sale proceeds, but you need to ensure required utilisation has been done before you file your IT returns for the year when actual sale happens. If LTCG amount (full or part of) has not been used for buying bonds under section 54EC or purchase/construction of residential house property before the filing date, it is required to be kept in a Capital Gain Scheme Account, but not in savings account. Else the whole or part of (unutilised) LTCG amount will be taxed at 20% plus applicable cess.

          Reply
  • October 12, 2013 at 1:02 PM
    Permalink

    my mother is selling a LAND ( not house) .
    1. can she save capital gain by investing in 54 EC bonds?
    2. if she bought land at 7 lacks and sold at 40 lacks what will be the capital gain on this sale?
    3. should she invest entire amount of this 40 lacks in these bonds to save tax or only the amount that is calculated as capital gain above?

    Reply
    • October 12, 2013 at 9:01 PM
      Permalink

      Hi Sowmya,

      Please find the answers in sequence to your queries

      1. Yes, it is allowed
      2. For this you need to provide me the date of purchase and selling date along with other relevant buying/selling expenditures if any.
      3. Since the property sold is other than house property, here u/s 54F to save tax you need to invest entire sale proceeds in purchase of a new residential house within a period of one year before, or two years after the date of transfer/sale. The sale consideration can also be utilised to save taxes within a period of 3 years in construction of residential house.

      Reply
  • October 22, 2013 at 2:52 PM
    Permalink

    I’m a non resident who has recently sold an ancestral property
    I’m now looking at investing in the 54ec bonds

    my question is whether after the mautrity in 3 years … can i repatriate the amount or will i have a tax liability for the repatriation

    Regards

    Reply
    • October 22, 2013 at 4:31 PM
      Permalink

      Hi Prashant,

      Yes, you can repatriation it after 3 years, but you need to follow certain procedure as specified by RBI. Since interests payout on theses bonds are taxable, you need to pay tax on the interest portion as per you tax bracket, but not on capital invested.

      Reply
  • November 9, 2013 at 12:00 PM
    Permalink

    What happens in the case when you already own a property Property I, invest in Property II and sell out Property II before the expiry of 3 years.

    Reply
    • November 9, 2013 at 1:06 PM
      Permalink

      Hi Aarihant,

      It’s straight! you will incur short term capital gains on the sale of property II & will be taxed as per your tax slab.

      Reply
  • November 16, 2013 at 12:47 PM
    Permalink

    My F.I.L is selling a land property. He is getting say Rs.50 lacs.
    To save him from payment of LTCG tax, I am advicing him to invest in specifid bonds. (Say partial investment of Rs.30 lacs)
    I suppose, he will get 6% interest for three year period on the invested Rs.30 lacs and after three years on getting the money back (original investment of Rs.30 lacs) he will not be taxed on that money and he is free to use Rs.30 lacs. There is no need to invest this Rs.30 lacs in any manner.
    Please reply.

    Reply
    • November 16, 2013 at 1:51 PM
      Permalink

      Hi Anil,

      Yes! your understanding is correct.

      But do remember! any gains arising to an individual or HUF from sale of any Long Term Capital Asset (other than residential house property) will only be exempted from tax if assesseee invests the entire sale consideration in purchase/construction of a residential house property within given time limit. Else any unutilised sale proceeds will be taxed proportionately to the gain amount.

      Apart from these, stated Capital Gains Bonds u/s 54EC are also available for claiming exemption of tax on long term capital gains earned from transfer/sale of long term capital asset.

      Reply
    • March 19, 2014 at 6:01 PM
      Permalink

      I get Rs. 30,00,000/- as my share after sale of our perental property which was costructed 50 years back, and now I purchase a residential flat of Rs. 21,00,000/-, and Rs. 10,00,00/- is deposited in capital gain bond(54EC).
      Q1. Whether I get tax rebate for the hole amount of Rs. 30,00,000/-
      Q2. After three years, whether the anount Rs. 10,00,000/- is tax free?
      Q3. The interest @6% pa will be taxable.
      Please provide the reply point wise and obelige.

      Reply
      • March 19, 2014 at 7:32 PM
        Permalink

        Hi Banerjee,

        Find answers in sequence to your queries;
        A1. Yes! but to the extent of long capital gain amount (your share).
        A2. Yes
        A3. Yes! It is. But you need to declare this as a part of your total income while filing IT return and pay tax.

        Hope I clarified all your queries.

        Reply
  • November 23, 2013 at 11:05 AM
    Permalink

    RESPECTED SIR,
    MY MOTHER SOLD AN 1994 PROPERTY ( PURCHSED AT COST OF RS.50,000) FOR RS 28.00 LAKHS. NOW MY QUESTIONS ARE
    1. CAN SHE INVEST THIS AMOUNT JOINTLY IN REC/NHAI CAPITAL GAIN BONDS
    2. PL. CLARIFY WHETHER ANNUAL INTEREST PAYABLE IS ONLY TO IST APPLICANT OR TO ALL THE APPLICANTS
    3. PL. CLARIFY WHETHER REDEMTION AMOUNT PAYABLE IS ONLY TO IST APPLICANT OR TO ALL THE APPLICANTS

    Reply
    • November 23, 2013 at 2:41 PM
      Permalink

      Hi Anand,

      Please find the answers in sequence to your queries;
      1. To save taxes on LTCG, it has to be invested in your mother’s name.
      2. Annual Interest will be payable to your mother only.
      3. Even maturity proceeds will go to your mother.

      Reply
  • January 7, 2014 at 10:49 PM
    Permalink

    Hello Sir

    Let us say for property bought in 2001 and selling in 2014 . For 50 lacs component let us suppose we invest 54cc bonds. After three years period, do we need to reinvest in land/house?
    Also for 30% tax bracket we get around 4% (after tax deduction)

    54cc is parking period only?. or after investing you do not need to re-invest correct?

    Many Thanks for your support

    Reply
    • January 7, 2014 at 11:16 PM
      Permalink

      Hi RB,

      You don’t have to reinvest after the lockin period is over.

      Reply
      • January 7, 2014 at 11:56 PM
        Permalink

        Many Thanks , for quick one.

        If you drop e-mail, will ask for help in propriety transactions. After 3 years lockin time, can we have to invest in FD’s or stocks or agriculture land.

        Reply
        • January 8, 2014 at 9:57 AM
          Permalink

          Hi RB,

          After the locking, it’s upto you where you would like to invest.

          Reply
  • July 15, 2014 at 4:02 AM
    Permalink

    Hi,

    Is Interest received on REC Capital Gain Bonds taxable on receipts basis (the year you received interest) or on accrual basis?

    Reply
    • July 15, 2014 at 9:33 AM
      Permalink

      Hi Raju,

      It is in the year you receive.

      Reply
      • April 6, 2015 at 7:29 PM
        Permalink

        Could you please direct me to the provision which says that the interest is taxable on receipt and not on accrual basis?

        I’m currently trying to find out whether I need to pay self assessment tax for the previous year on this interest portion or pay advance tax for the current year since I have received the interest amount only in April this year.

        An early response would be greatly appreciated!

        Reply
        • June 16, 2015 at 10:19 PM
          Permalink

          Hi Anirudh,

          Since interest payments are on annual basis, thus it is taxable on receipt, but not on accrual.

          Reply
  • August 9, 2014 at 6:30 AM
    Permalink

    Sir, cost of land purchased by me after indexation is Rs 1 lakh I sold this land (not house) for Rs. 5 lakh , as collector rate was high so I paid registration fee on double amount i.e. 10 lakh on which amount I have to pay tax rs 4 lakh or rs 9 lakh and how much maximum amount can I invest under section 54eb (NHAI/ REC bonds) for complete tax saving.

    Reply
    • August 9, 2014 at 8:42 PM
      Permalink

      Hi Mahesh,

      Since it is a Land sale, you need to invest complete sale proceeds to save tax on LTCG, though tax will be calculated on Sale Consideration amount minus Indexed Cost of Acquisition i.e. Rs. 4,00,000 [Rs. 5,00,000 – Rs. 1,00,000]

      Reply
  • August 17, 2014 at 12:33 PM
    Permalink

    Would like advise on the below query: if capital gain after sale of property is rs. 80 lacs, can an assessed invest 50 lacs in capital gain bonds and balance 30 lacs in a residential property? The proportion may vary but does the income tax act permit this option?

    Reply
    • August 17, 2014 at 2:26 PM
      Permalink

      Hi Aarti,

      Yes! It is allowed

      Reply
  • August 18, 2014 at 4:20 PM
    Permalink

    If i have invested the capital gain amount in Capital Gain A/c in a bank. However, now i am not able to find any suitable property for investing, can i invest the amount in capital gain bonds u/s 54 EC from the money lying in the Capital Gain A/c.

    Reply
    • August 18, 2014 at 5:42 PM
      Permalink

      Hi Prateek,

      It’s not allowed

      Reply
  • September 25, 2014 at 7:00 PM
    Permalink

    Hi,
    I want clarification on the 3 year locking…
    If I invest in February 2015,will March 31,2015 be considered 1 year and hence would I be eligible to cash out after March 31,2017?
    I understand that interest is paid on March 31 of each year…
    Thanks

    Reply
    • September 27, 2014 at 9:29 AM
      Permalink

      Hi Kunal,

      You said investment will be on 2015, then 3 years will be completing on 2018, not 2017.

      Reply
  • September 30, 2014 at 1:11 PM
    Permalink

    After seeling a land property, in which account the money out of sale procedings is to be deposited ( if one does not want to purchase other real estate property and wants to buy 54EC bond for Long term tax gain) ? Is it simple savings bank account or any other account is to be opened?

    Reply
    • October 1, 2014 at 9:20 PM
      Permalink

      Hi Susanta,

      You have already cleared that there is no intention to invest in new property then you are left with only one option i.e. invest in 54EC Bond within 180days from the date of sale. Please note, only upto Rs. 50Lacs is allowed to be invested out of total sale value.

      Reply
  • October 2, 2014 at 11:51 AM
    Permalink

    Hi Soubhagya Kumar Patra

    As my client had invest more tham 50 lakh in Capital Gain Tax bond s by mistakable, So how can withdraw such excess amount from this two . Pl note that client invest half amount in NHAI & Rec also . If you know any processor pl give me

    Reply
    • October 2, 2014 at 9:23 PM
      Permalink

      Hi Kailas,

      As per the issuers of these bonds, “the maximum size of investment should be Rs. 50Lacs subject to fulfillment of other conditions as specified in Income Tax Act”, but they can’t figure out if you have done investments with both of them making it a total of more than Rs. 50Lacs.

      As per my understanding, these investments are locked for 3 years, so there is no chance to take the money out or do partial withdrawals in between. With regards to section 54EC, your client will get benefits upto investment of Rs. 50lacs and rest invested amount will get taxed.

      I would suggest you to talk/write to these issuers to get a pertinent answer. It would be great if you comeback and share the experience.

      Reply
  • October 2, 2014 at 8:28 PM
    Permalink

    A house bought in 1960 is to be sold for Rs. 5 Crores. Only Rs.50 lakhs can be put in bonds as per rules. Can the rest be put in bank fixed deposit at 9.5% for 3 years, and then a house is purchased or constructed? Or can I just pay 20% LTCG tax after 3 years (but the fixed deposit compensates for any loss).

    Reply
    • October 2, 2014 at 9:07 PM
      Permalink

      Hi Hari,

      You are simply putting yourself in trouble of IT scrutiny and attracting unwanted penalties and interest on tax. Better pay tax and then use the money as per stated purpose.

      Reply
  • November 12, 2014 at 12:18 PM
    Permalink

    If I hv long term capital gain of Rs 80 lacs in the month of February can I get exemption as per section 54EC . 50 and 30 lacs in previous year and assessment year if invested within 6 months

    Reply
    • November 13, 2014 at 11:49 PM
      Permalink

      Hi Ritesh,

      You will get exemption for that Rs. 50Lacs you mentioned, but not for 30Lacs.

      Reply
  • December 10, 2014 at 8:57 AM
    Permalink

    Dear Sir
    I have 2 queries
    a) I sold off my flat for which I was the sole owner. I plan to purchase the NHAI bonds to save on Capital Gains. Can I purchase the NHAI bonds jointly with my wife with me being the 1st applicant??

    b) My above flat was earlier in the joint name of my mother and myself for 9 years .
    She later gifted me her shares and the house was registered in my name as a sole owner. I later sold the flat within 3 months . Is it the LTCG or STCG??

    Reply
    • December 15, 2014 at 8:08 AM
      Permalink

      Hi Dinesh,

      a. Yes! you can
      b. Any gains will be treated as LTCG and indexation will be taken from the date of acquisition by previous owner(s) for calculation of taxable long term gains

      Reply
  • February 8, 2015 at 7:59 PM
    Permalink

    If I am selling my flats and constructing house , the amount will go to capital gain account, what is the procedure to takeout money for payment for metirials and labour payment.

    Reply
  • February 8, 2015 at 8:11 PM
    Permalink

    Suppose I sold my flats Rs 30 L , after indexation gain is 14 L. I want to construct my house.Can entire amount to be deposited to capital gain account or only gain to be deposited? How money can be withdraw to purchase metirial for construction and for labour payment?

    Reply
    • February 12, 2015 at 10:08 AM
      Permalink

      Hi AK,

      You can produce valid payment demands or bills from contractor/builder constructing the house. Fyi, later when you wish to sell or wish to claim any expenses during construction you should have proper bills/invoice details for every transaction to avoid any disallowance of expenses/costs which may happen in absence of valid proofs.

      Reply
  • February 24, 2015 at 2:29 PM
    Permalink

    whether bonds on maturity are taxable or not, if no then according to which section of Income Tax Act.

    Reply
    • February 27, 2015 at 7:00 PM
      Permalink

      Hi Gautam,

      Wrt 54EC bonds, on maturity principal is tax free, but interest earned for the FY will be taxed under the head of “Income from Other sources” . You may refer section 56(2)(id) for the same.

      Reply
  • February 27, 2015 at 10:27 AM
    Permalink

    If I sell a property in March 2015 and the parties bank loan is passed in Aprilthen eI will get the final payment. Can I still invest in Nhai bonds .or how do I go about it.

    Reply
    • February 27, 2015 at 7:21 PM
      Permalink

      Hi Priya,

      No worries! You will have 180 days from the date of sale of property to invest in such bonds irrespective of which financial year it falls.

      Reply
  • May 11, 2015 at 7:27 PM
    Permalink

    Hi,
    Interest received on REC Capital Gain Bonds taxable on receipt basis (the year in which interest received) or on accrual basis?
    Thanks

    Reply
    • June 15, 2015 at 8:15 PM
      Permalink

      Hi Neela,

      Since interest payments are on annual basis, thus it is taxable on receipt, but not on accrual.

      Reply
  • May 11, 2015 at 7:30 PM
    Permalink

    Hello,
    After maturity of the REC LTCG bonds after 3 years is it again taxable or I need not tax further!

    Thank You

    Reply
    • June 13, 2015 at 10:47 PM
      Permalink

      Hi Ritu,

      After maturity only interest credit amount will be taxable. In case appreciation in bond value, it will be taxable under capital gain.

      Reply
  • May 18, 2015 at 4:12 PM
    Permalink

    Hello,

    Is interest earned on REC Bonds purchased under Section 54EC taxable on receipt basis (the year you received interest) or on accrual basis?

    Thanks a lot!

    Reply
    • June 15, 2015 at 8:12 PM
      Permalink

      Hi Neha,

      Since interest payments are on annual basis, thus it is taxable on receipt, but not on accrual.

      Reply
  • May 20, 2015 at 6:14 AM
    Permalink

    Hello
    Mr. Patra

    God bless u for helping so many people.

    My issue is I bought one property in 2006, for which I paid Rs. 101000/- as earnest money. Deal was done on 25,85000/-. Some how I didn’t recieved the property. So I put court case on seller. Now in 2015 we compromised and settle the case for 2000000/- . so now is this a capital gain. ? If yes how much capital gain? I paid court fees around 50000/- and advocates fees around 300000/-.
    Kindly help me out.

    Regards
    Praveen Pathania

    Reply
    • May 20, 2015 at 7:07 AM
      Permalink

      Hi Praveen,

      If you are making any profit out this transaction i.e. the mount received after sale/transfer minus amount paid for acquiring the property then it will arise capital gains. Unfortunately court fee & lawyer fee will not get adjusted with capital gains.

      Reply
  • June 15, 2015 at 1:58 PM
    Permalink

    Amount was invested on December month end(2014)…as per their website(REC) interest is paid on June 30(6%)…. So will I be eligible to get a interest for six months from the date of allotment of bond.

    Reply
    • June 15, 2015 at 7:54 PM
      Permalink

      Hi Trived,

      Yes! you are. You will get interest credit which will be calculated at a rate of 6% pa for the period starting from the date of investment i.e. December end 2014 till end March 2015.

      Reply
      • July 8, 2015 at 12:50 PM
        Permalink

        Invested in rec bonds in 8 months after sale of property now what happens I did it through bank how did they accept my in estment

        Reply
  • July 8, 2015 at 12:54 PM
    Permalink

    Invested in rec after 180 days how did they accept it I did it through the bank from the capital gains account what happens now

    Reply
    • July 10, 2015 at 9:50 PM
      Permalink

      Hi Gopal,

      The timeline has been given to get the exemption benefits, but doesn’t stop you do the investment afterwards also. In your case, you will not be able to get the deduction benefits because 180 days are already over.

      Reply
  • July 11, 2015 at 6:01 PM
    Permalink

    hi sir..
    I have 2 queries..
    1.I received approx rs. 1l interest on rec bonds..
    I am a student.. might get placed next year..
    will the interest I received b taxable..
    or will it b taxable once I start earning..
    what about tax on next year’s interest..
    2. Is there any provision that I could receive the interest monthly..

    Reply
  • July 11, 2015 at 6:12 PM
    Permalink

    hello sir..
    I have 2 queries..
    1.I received approx rs 1l interest on rec bonds..
    I am a student meaning currently I have no income.. I might get placed next year..
    will the interest I received b taxable..
    what about the interest I will receive next year..
    2. is there any provision that I could receive the interest monthly..

    Reply
    • August 16, 2015 at 8:47 AM
      Permalink

      Hi Apoorva,

      1. If you have no other income or any other income (including this bond interest) do not cross Rs. 2,50,000 then it will not be taxable. Same applies for next year as well.
      2. Such Bond Interest are yearly payout only.

      Reply
  • August 16, 2015 at 2:06 PM
    Permalink

    Afetr the 3 years loking period of RECbonds is over can I use the principal amount wich I invest in bond use for BANK FDSor any other perpouse ? 2-will I liable the gain tax on thus principal amount once again after the maturity? Plese help me. THANKS.

    Reply
  • August 17, 2015 at 6:10 PM
    Permalink

    Sir I know that after 3years of loking period ofRECBonds the principal amount wich I invest in thus bond can I invest in BANK FDS or enjoy with any other purpose? Ya that amount will I have in Rec bonds once

    Reply
    • August 18, 2015 at 9:43 PM
      Permalink

      Hi Alok,

      Yes, you can do so.

      Reply
  • August 18, 2015 at 11:44 PM
    Permalink

    Sir thanks to you very much .but I want to know that about question of 16 august 2015 .plese clerify to me.that after maturity of rec bond the principal amount thus I invest in bonds will once again lible for gain tax ? Or ienjoy with any other purpose or invest in Bank Fds.? Plese help me & suggest me what can I do without any problem ? Thanks.

    Reply
    • August 19, 2015 at 11:57 PM
      Permalink

      Hi Alok,

      After maturity principal amount will not be taxable again. You can invest in FD or anything you wish to.

      Reply
      • August 20, 2015 at 5:19 PM
        Permalink

        Thanks a lot sir.I hav fully satisfied with you..

        Reply
        • August 20, 2015 at 7:44 PM
          Permalink

          You are most welcome Alok!

          Reply
  • August 20, 2015 at 10:39 AM
    Permalink

    Dear Sir,

    My mother who is 84 yrs old sold her only plot for 30L during July 2014 and invested the entire proceeds in REC 54EC bonds within 6 months from the date of sale.
    She got her first interest this June into her bank account. She holds a joint account with my father. My father gets his government pension which is no way near the taxable income. My question is

    1. Can my mother get the interest credited in the joint account as it is the only bank account she has.
    2. Should she file the returns this Aug 2015 though she invested the entire proceeds in REC capital gain bonds.
    3. She intends to divide the proceeds post maturity in 2017 to her sons / daughters. In that case, will the receiver (son / daughter) consider this as income or it is considered TAX FREE for the receiver also. Kindly guide.
    Regards
    SM

    Reply
    • August 28, 2015 at 9:33 PM
      Permalink

      Hi SM,

      Sorry for late response! Find answer in sequence;
      1. Yes, Why not! While filing ITR returns, properly separate their income and declare.
      2. It is better to file IT returns.
      3. Since the receivers are under the category of Relatives, then no TAX in the hands of receivers.

      Reply
  • August 20, 2015 at 12:04 PM
    Permalink

    Dear Sir,

    My mother who is 84 yrs old sold her only plot for 30L during July 2014 and invested the entire proceeds in REC 54EC bonds within 6 months from the date of sale.
    She got her first interest this June into her bank account. She holds a joint account with my father. My father gets his government pension which is no way near the taxable income. My question is

    1. Can my mother get the interest credited in the joint account as it is the only bank account she has.
    2. Should she file the returns this Aug 2015 though she invested the entire proceeds in REC capital gain bonds.
    3. She intends to divide the proceeds post maturity in 2017 to her sons / daughters. In that case, will the receiver (son / daughter) consider this as income or it is considered TAX FREE for the receiver also. Kindly guide.
    Regards

    Reply
  • August 21, 2015 at 2:58 PM
    Permalink

    Dear Mr.Patra,
    I had sent a query yesterday. Await the reply.
    Regards
    SM

    Reply
  • August 26, 2015 at 4:02 PM
    Permalink

    Dear Sir
    It is almost a week since I wrote to you and the same is not published with your answers. May I know the reasons?
    Regards
    SM

    Reply
    • August 28, 2015 at 9:33 PM
      Permalink

      Hi Maadhu,

      Sorry for late response! Find answer in sequence;
      1. Yes, Why not! While filing ITR returns, properly separate their income and declare.
      2. It is better to file IT returns.
      3. Since the receivers are under the category of Relatives, then no TAX in the hands of receivers.

      Reply
    • September 8, 2015 at 2:28 PM
      Permalink

      Dear Mr.Patra,

      For the earlier query, is it okay to file in itr5 as the only income is LTCG which is reinvested.
      Await your reply.
      Regards
      SM

      Reply
  • September 6, 2015 at 10:49 AM
    Permalink

    Sir ! Namaskar once again.My father has invest some amount in Rec Bond and he has received the interest on these bond in next june for the first time.I know about this if the father give these interest amount to me by cheque & with a signed by a Gift letter wich is above Rs.50000 .these amount libile to Gift Tax ? Please Reply to me .Thanks.

    Reply
    • September 6, 2015 at 10:43 PM
      Permalink

      Hi Alok,

      Gift in cash & kind from father is tax free. But interest from such bonds are taxable in the hands of investor.

      Reply
      • September 10, 2015 at 10:38 AM
        Permalink

        Many-Many thanks sir !

        Reply
  • September 8, 2015 at 2:38 PM
    Permalink

    Dear Mr.Patra
    One more query.
    If the income is Salary + Rental income from house + Pension from LIC + LIC renewal commission for agency, which ITR form to be used?
    I know the query is late, but for academic interest.
    Regards
    SM

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

css.php
Read previous post:
Repercussion of Undisclosed Income, Investment & Expenditure by Tax Payer

There may be instances where some investments are done in your name, payments of others expenditures done by you, but the source...

Close