CAPITAL GAINS. : BENEFITS OF INVESTING IN 54 EC BONDS.

Investing in 54EC bonds gives you a double benefit of savings tax and earning fixed interest income.

Exemption Eligibility:

Investors who earned long-term capital gains during the financial year from sale of land or building or both are eligible to get exemption under section 54EC of income tax act. Immovable property, whether land or building or both, should have a holding period of 24 months or more to qualify as a long-term asset and any profit or gain arising from the sale of these assets treated as long term capital gains. Investors can avail this exemption by investing in bonds issued by PFC (Power Finance Corporation Ltd), REC (Rural Electrification Corporation Ltd), Indian Railway Finance Corporation (IRFC) and NHAI (National Highways Authority of India). The investment should be made within a period of 6 months from the date of sale of these specified assets to get exemption under section 54EC of income tax act.

Key Features & Benefits:

»   Allows to save tax on Long term capital gains and provides fixed interest income. »   Assured interest of 5.75% per annum payable annually. »   No TDS on interest payments & Interest is taxed as per individual slab rates. »   Highest credit ratings of “AAA” from CRISIL, ICRA, IRRPL and CARE. »   Issued by Public sector units & backed by government. »   Can be held in either physical or Demat mode. »   Non transferable and non negotiable bonds.

*Illustration: Capital Gain exemption u/s 54 EC

Particulars Scenario - 1: Not Invested in 54EC Bonds Scenario - 2: Invested in 54EC Bonds Amount (Rs) Amount (Rs) Long term Capital Gains 5,000,000 5,000,000 Less: Deduction u/s 54EC - 5,000,000 Taxable Long term Capital Gains 5,000,000 - Tax Payable@20.80% on LTCG 1,040,000 - Net Gains 3,960,000 5,000,000   Proceeds invested in FDs Invested in 54EC Bonds Net Proceed from sale 3,960,000 5,000,000 Assumed Returns per annum 7.0% 5.75% Assumed Individual Tax slab rate 31.20% 31.20% Post Tax return 4.82% 3.96% Post tax accumulated value after 5 Years 5,009,947 6,070,407 Effective yield after considering Capital gains tax 0.04% 4.0% *Disclaimer: The numbers and data used for the above calculation are for illustrative purposes only, original numbers may vary.