Capital Gains Bond - SEC 54 EC
Capital Gains Bond - SEC 54 EC
Welcome to our Capital Gains Bond - SEC 54 EC product page. We offer a comprehensive investment solution designed to help you save on capital gain taxes while securing attractive returns.
Overview
Capital Gains Bond, also known as Sec 54 EC Bonds, are a type of investment instrument authorized by the Income Tax Act, 1961. These bonds provide an opportunity for individuals to save on long-term capital gains taxes incurred from the sale of property or assets. By investing in these bonds, you can defer the payment of capital gains tax and enjoy the potential benefits of a reliable investment option.
Provisions of Section 54EC
As per provisions under section 54EC of Income Tax Act, 1961, any long term capital gains arising from transfer of any capital asset would be exempted from tax if:
- The asset being sold is a Long Term Capital Asset, which includes land or building or both. (The asset is considered long-term if the taxpayer has held it for a minimum of 24 months prior to the sale).
- The entire capital gains realized is invested within 6 months of the date of transfer in eligible Sec 54 EC Bonds.
- Such investment is held for 5 years and the bonds so acquired cannot be transferred or converted into money or any loan or advance can be taken on security of such bond within 5 years from date of acquisition else, the capital gain exemption benefit would be withdrawn
- If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempted from tax.
- The total investment amount cannot exceed INR 50 lakhs during the current financial year and the subsequent financial year.
Bonds eligible and available for exemption under section 54EC of the Income Tax Act
Features of Capital Gains Bonds
Issue Opening Date: April 1, 2023, Issue Closing Date: March 31, 2024
| RECL | IRFC | |
|---|---|---|
| Coupon/Interest rate/Yield | 5.25% annually (No TDS) | 5.25% annually (No TDS) |
| Rating | AAA / Stable (CRISIL/ICRA/CARE) | AAA Stable (CRISIL/ICRA/CARE) |
| Tax Status | Taxable | Taxable |
| Tax Benefit | SEC 54 EC | SEC 54 EC |
| Face Value / Issue Price (Rs.) | 10,000 | 10,000 |
| Minimum (Rs.) | 20,000 | 20,000 |
| Maximum (Rs.) | 50 Lakhs in a Financial Year across RECL | 50 Lakhs in a Financial Year across IRFC |
| Tenor | 5 Years (automatic redemption at maturity) | 5 Years (automatic redemption at maturity) |
| Interest Date | 30th June | 15th October |
| Mode Of Interest | Annual | Annual |
| Transferability | Non-transferable, non-negotiable and Non Marketable, cannot be offered as a security for any loan or advance. | Non-transferable, non-negotiable and Non Marketable, cannot be offered as a security for any loan or advance. |
Who are eligible to Invest?
The exemption under Section 54EC can be claimed by any taxpayer, including
- Resident and Non Resident Individuals
- Hindu Undivided Family (HUF)
Why you should invest in Capital Gains Bond?
- Capital Gains Tax Deferral: By investing in Capital Gains Bonds, you can defer the payment of capital gains tax, which helps in managing your cash flow more efficiently.
- Stable Returns: The fixed interest rate offered by these bonds ensures stable returns, however combined with the capital gain tax saved returns are comparable to other market investments.
- Low Risk: Capital Gains Bonds provide an opportunity for relatively safe investments since they are issued by government entities and rated ‘AAA’ by credit rating agencies.
- Long-Term Investment Option: If you have a long-term investment horizon and want to reduce your tax liability, Capital Gains Bonds can be an excellent choice. They offer tax benefits while providing a reliable investment option.
How to Invest in 54EC Bonds?
- These bonds are not listed in the stock exchange. Hence you can buy them by the issuer directly either in a demat form or a physical form. To apply for our Capital Gains Bonds, follow these simple steps:
- Visit your nearest IDBI Bank branch to obtain the application form.
- Fill in the necessary details, ensuring accuracy and completeness.
- Attach the required documents, including identity proof, address proof, PAN card details and cancelled cheque.
- Submit the completed application form along with the supporting documents and attach either a demand draft or account payee cheque at the IDBI Bank branches of collection.
- Upon verification and approval, you will receive the bonds in your designated demat account or physical form.
Download the respective bond Form from here –
- REC 54 Download form (IDBI Bank Broker Code : 111) - Click Here
- IRFC 54 EC Download form (IDBI Bank Broker Code : 36) - Click Here
Frequently Asked Questions (FAQs)
Any individual or Hindu Undivided Family (HUF) liable to pay long-term capital gains tax can invest in Capital Gains Bonds.
Capital Gains Bonds come with a lock-in period of five years from the date of issuance.
No, you cannot transfer or redeem the bonds before the completion of the lock-in period.
Yes, the interest earned from these bonds is taxable as per the prevailing income tax laws.
After the lock-in period, you have the option to redeem or transfer the bonds as per your financial requirements.
Investing in Capital Gains Bonds can provide you with the benefits of tax savings and stable returns. Take advantage of this investment opportunity today and secure your financial future.