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54EC bonds, or capital gains bonds, are one of the best way to save long-term capital gain tax. 54EC bonds are specifically meant for investors earning long-term capital gains and would like tax exemption on these gains. Tax deduction is available under section 54EC of the Income Tax Act.
54EC bonds do not allow any tax exemption on short-term capital gains tax. Invest in 54EC bonds to get benefits of tax deduction. The maximum limit for investing in 54EC bonds is Rs. 50,00,000.
The eligible bonds under Section 54EC are:
Already Applied?
Track your allotment status by clicking on the following links.
List of documents required to invest in 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
Identity 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
Instructions to submit 54EC CGTE Bonds online application form through Net Banking/ Debit Card
To fill the application form online, investor should be have the following information and documents available in PDF format.
a. email ID
b. Mobile.
c. Self-attested Pan card Proof (PDF only)
d. Self-attested Address Proof (PDF only)
e. Cancelled Cheque for application with Physical Bond securities
Step 1:
1. Click the “Fill a New Form online” button
2. Fill the application form online and submit
3. SMS will receive on successfully application submitted.
4. Download the duly filled application form.
5. Take a print out and check all the fields and signatures should be done by all applicant(s)
6. Scan the application copy duly signed by all applicant(s) and save as PDF format.
Step 2:
7. Click the “upload Application/KYC documents” button
8. Enter the following application details as submitted online to validate the application form a. Application No. b. Email ID c. Mobile
9. Click “Get OTP” button - to receive an OTP on your email and mobile.
10. Enter OTP received on mobile / email ID and click “Validate“
11. On validation, the application information will be displayed.
Step 3:
12. Upload the following valid PDF documents to proceed for payment
a. Application form duly signed
b. ID proof with self attested
c. Address Proof with self attested
d. Others If any / Cancelled Cheque for Physical Holders
13. On upload of above documents, it will enable the payment gateway “Proceed to Payment” button.
Step 4:
14. Pay thru Netbanking / Debit Card
15. On success/fail of the payment, the acknowledgement will be generated and the same will be sent thru email.
Key Features of 54EC Bonds
54EC bonds are popular investment instruments as investing in 54EC bonds allows investors to claim tax deductions on long-term capital gains. 54EC bonds also offer other features.
Safe and Secure: 54EC bonds are AAA rated.
Interest: Interest on 54EC bonds is taxable. No TDS is deducted on interest from 54EC bonds and wealth tax is exempted.
Tenure: 54EC bonds come with a lock-in period of 5 years (effective from April 2018) and are non-transferable.
Investment amount: Minimum investment in 54EC bonds is 1 bond amounting to Rs. 10,000 and the maximum investment in 54EC bonds is 500 bonds amounting to Rs 50 lakhs in a financial year.
Interest Rate: 54EC bonds offer 5.25% rate of interest payable annually.
Non transferable and non negotiable bonds
Available in Physical as well as demat form
AAA credit rating by ICRA, CRISIL and India Ratings and Research Private Limited
No TDS but interest earned is taxed
Key Benefits of 54EC Bonds
Individuals as well as members of HUF can make investments in 54EC bonds.
You should invest in 54EC bonds within 6 months of transferring capital asset. Take a look at the benefits of investing in 54EC bonds.
Bonds offered under sec 54EC
With effect from FY 2018-19, benefit of investing in 54EC bonds would be available on sale of land or building (residential or commercial). The capital gains 54EC bonds eligible for tax deductions can be issued only by
» REC (Rural Electrification Corporation Ltd),
» PFC (Power Finance Corporation Ltd) and
» IRFC (Indian Railways Finance Corporation Limited)
» NHAI (National Highways Authority of India). (Closed from 03.09.2022)
Avail the opportunity to invest in 54EC bonds to gain tax deductions.
The Analysis
According to section 54EC of I.T., any person (individuals, HUFs, partnership firms, companies etc.) can avail exemption in respect of long-term capital gains (arising from the sale of a long-term capital asset other than equity shares and securities), if the capital gain is invested in Capital Gain bonds. The exemption will be the amount of capital gain or the amount of investment made, whichever is less.
The interest rate offered on these bonds is 5.25% per annum. The exemption is subject to:
• The investment is made within a period of 6 months from the date of transfer of the asset
• Lock-in period 5 year.
• Bonds sold, transferred or converted into money or any loan or advance taken on the security of such bond within a period of 3 years from the date of acquisition, the capital gains earlier exempt are taxable in the year of sale or transfer of the bonds
• Maximum investment limit of up to Rs. 50 Lakhs in a Financial Year per individual.
• If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax.
Those who wish to save taxes on LTCG can invest the amount in the capital gains bonds within six months from the date of arising profit. By investing in 54 ec Capital gain bond one can save up to Rs 50 Lakh in a single financial year. These instruments are not only capital protected instruments, but they also provide a steady stream of income to you.
Bond offered (under sec 54 EC):
» Power Finance Corporation (PFC) »
Rate of Interest
5.25% p.a. (effective – April 01, 2023)
Tenure
The tenure of the Bonds will be 60 Months and Bonds will be automatically matured at the end of the period, from the deemed date of allotment.
» Rural Electrification Corporation Ltd (REC) »
Rate of Interest
5.00% p.a. (effective – April 01, 2023)
TAX Exemption under Section 54 EC:
1. Section 54 EC bonds can be used to save tax only when the capital gain is derived from land or building or both.
2. It cannot be used to save tax on capital gain arising from the sale of non-equity mutual funds, debentures, gold jewelry or gold ETFs.
3. The maximum investment in these bonds is Rs. 50 lakh only. As the property prices have soared high, this provision does not provide adequate relief for the investor.
» What is the mode of application?
You can apply for the 54 EC bonds offline with physical forms and Online via Debit/credit Card or Net Banking.
» What are the modes of payment?
The payment can be done through cheque, DD, RTGS or Online.
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