01 Feb 2023 • 4 min read
Most people are aware of the benefits one can get from selling property. But how can they be an excellent investment, and what exactly are they called? If you want to learn about the 54 EC bond, read along.
Capital gain bonds or commonly known as 54 EC bonds are fixed-income investments that provide capital gain tax exemptions to investors under section 54EC. Investors who purchase these bonds can reduce their tax liabilities on the long-term capital gains from the sale of immovable property.
The owners of these bonds are known as the debtholders or the creditor of the issuer. Infrastructure companies that the government backs are only eligible to issue these bonds. Since capital gain bonds are easily redeemable before maturity, it is among the favorites. The only drawback, however, is you can sell these bonds on the stock exchange since they are outside the listed shares. In addition, capital gain bonds are taxable, with an interest rate of around 5 to 6%.
The different kinds of capital gain bonds are listed below. Section 54EC of the Indian Income Tax Act also permits tax exemption for these bonds.
Here are the tax benefits of investing in these bonds and the ways by which you can avail of the exemption
Since capital gain bonds do not list on the Indian Stock Exchange, you cannot buy them through the stock market. Therefore, the only way of purchasing these bonds is through direct buyers, either in a Demat or physical form.
Once the bonds are purchased, follow the below steps to invest in them:
While understanding capital gain is one parameter, understanding how it works or how to calculate them is also vital. The below pointers will help you understand the calculation of the long-term capital gains or the capital gain bonds:
People should not be worried about selling their property and paying taxes on the gains because now it can be exempted under long-term capital gains or capital gain bonds. Capital gain bonds come with zero risk, and the annual income from the interest earned is guaranteed per the Indian Income Tax Act.