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Capital Gain Bonds

 

Long-term capital gain is the gain that is derived out of a sale of an asset (Land or Building) that has been held for more than two years. You can invest the gain in certain specified bonds to claim tax exemption within 6 months of the date of sale of the asset. 54EC bonds, or capital gains bonds, are one of the best way to save long-term capital gain tax arising out of sale a capital asset.The maximum limit for investing in 54EC bonds is Rs. 50,00,000. The eligible bonds under Section 54EC are REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd) , NHAI (National Highways Authority of India) and IRFC (Indian Railways Finance Corporation Limited).

 

How Capital Gains Bonds Help in Tax Exemptions?

These are the following conditions which need to be met to avail tax exemptions under Section 54EC:

1.       The investment amount should originate from capital gains arising out of the sale of assets such as land or building or both

2.       Investment amount should not exceed Rs. 50 Lakh. In case the capital gain was shared by partners in a real estate business, each partner is entitled to a maximum limit of Rs. 50 Lakh.

3.       Investment in NHAI,REC,PFC and IRFC bonds should be made within 6 months from the date of sale of the property or before filing their income tax returns.

Listed below are the Key features of Capital Gains Bonds:

Issue Details

On-going

Tenure

5 years

Rate of Interest

5.00% p.a. payable annually

Taxation

Interest is taxable although no TDS is deducted

Redemption

Automatic Redemption after 5 Years

Rating

AAA rated

Mode of Holding

Physical or Demat

Min Investment

1 Bonds (Rs. 10,000)

Max Investment

500 Bonds (Rs. 50,00,000 Lacs)

 

Capital Gains Bonds are issued by the below Corporations:

Bonds

Issue Details

Coupon

Rating

Tax Benefit

Tenure

Product Feature

Application Form

Rural Electrification Corporation

On-Going

5.00% p.a.

AAA Rating

Taxable Bonds with benefits under Section 54 EC of Income Tax Act, 1961

5 Years

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National Highway Authority of India

On-Going

5.00% p.a.

AAA Rating

5 Years

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Power Finance Corporation

On-Going

5.00% p.a.

AAA Rating

5 Years

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Indian Railways Finance Corporation

On-Going

5.00% p.a.

AAA Rating

5 Years

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Disclaimer : Interest Rates are subject to revision by the respective Companies/Government from time to time. The Federal Bank Limited acts as a referral agent to these companies through IFCI Financial Services Limited and the offer is brought to you by the companies subject to fulfilment of eligibility criteria, terms and conditions etc. Investors are advised to read the Terms and conditions offered by respective companies carefully before taking any investment decision

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