Capital Gain Bonds (54EC) Bonds

Capital gain tax exemption bonds (U/S 54EC):- FY2020- 2021

(Avail Tax benefit U/s 54EC of Income-tax Act)

Capital Gain Bonds are being issued as 'Long term specified assets' within the meaning of Sub-Section 54-EC of the Income Tax Act, 1961. Those desirous of availing exemption from capital gains tax under Section 54 EC may invest in these bonds. Capital Gains arising from the transfer of Long-term capital assets can be invested in these bonds within a period of six months from the date of transfer of the asset for getting exemption from the capital gains tax.

Provisions of section 54EC

As per provisions of Income Tax Act, 1961, any long term capital gains arising from the transfer of any capital asset would be exempt from tax under section 54EC of the Act if:

• The entire capital gain realized is invested within 6 months of the date of transfer in eligible bonds.

• Such investment is held for 5 years

  • To avail of capital gain exemption, 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or advance can be taken on security of such bond within 5 years from the date of acquisition else, the benefit would be withdrawn

  • If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax