54EC Capital Gain Bonds - Tax Benefits and Investments. (2024)

FAQs

Which capital gain bond is best for senior citizens? ›

54EC bonds are ideal for investors with substantial long-term capital gains and seeking to save tax while looking for a safe investment option. They are particularly beneficial for: Retirees and Senior Citizens: Those seeking a safe investment avenue with tax benefits.

However, Section 54EC of the Income Tax Act allows a deduction of up to Rs 50 lakh from the profit if invested in capital gain bonds within six months from the day you sell your property. This means putting your money in such bonds can save you up to Rs 10 lakh on taxes (20 per cent of Rs 50 lakh).

Can Section 54EC be claimed more than once related to the same property? Yes, the exemption under Section 54EC can be claimed multiple times related to the same property, subject to the overall limit of Rs. 50 lakhs per financial year.

Features of 54 EC Bonds

54EC Bonds have an interest rate of 5.25% per annum currently which is payable annually. This income is taxable although no TDS is deducted. 54 EC bonds have a maturity of 5 years from the date of issuance.

Key takeaways. Seniors must pay capital gains taxes at the same rates as everyone else—no special age-based exemption exists.

Explanation of the highest capital gain.

Since bonds with long maturities and low coupons have the longest duration because of their sensitivity to change in the market, they will produce the largest price change due to any interest rate change.

Sec 54 EC - Capital Gains Bonds | HDFC Bank.

No, as an investor, you do not have to pay any charges, fees, brokerage and commission to the broker for investing in 54EC IRFC-REC-PFC Capital Gain Bonds.

Yes. The lock-in period for these bonds is 5 years from the date of purchase. You cannot redeem or sell these bonds before the completion of this period.

50 lakh, or both of you may lose the benefit under section 54 EC. The bonds also offers a nomination facility. In case of death of one of the joint holders, the name of the deceased holder can be deleted from the bond. Also, transmission of bonds to legal heirs is permitted in case of the death of the holder.

Can NRI invest in 54EC bonds? ›

Section 54EC allows NRIs to claim exemption by Invest in Specified Bonds. You can also invest your long-term capital gains in particular bonds i.e., the Rural Electrification Corporation (REC) and the National Highway Authority of India (NHAI).

Invest in Bonds

To obtain this tax exemption on your capital gains, you should invest the sum earned in bonds within 6 months of the transfer of the sum and realisation of gains. In addition to this, the funds are required to be invested in these bonds for a minimum of three years as a lock-in period.

You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.

No TDS is deducted on interest from 54EC bonds and wealth tax is exempted.

Also known as Sec 54EC Bonds, capital gains bonds are a form of investment instrument approved by the Income Tax Act of 1961. These bonds are used by investors to save on long-term capital gains taxes derived from the sale of assets or properties.

Senior Preferred Bonds are attractive to investors because they offer a higher level of security compared to other types of debt. In the event of a default, investors holding Senior Preferred Bonds have a higher chance of receiving their principal and interest payments.

I bonds come with the advantage of being exempt from state and local taxes. This exemption means that regardless of your state, you won't owe state or local income taxes on the interest you earn from these bonds. This exemption can translate into substantial savings for retirees in states with high-income tax rates.

Rate of interest

REC bonds provide an interest of 5.25% per annum as on April 1, 2023, which will be paid every year on June 30 until redemption, and the company will pay the balance interest along with redemption.