54ec 54 EC Capital Gain Bonds or capital gains bonds as they are known, offer tax exemption on long term capital gains tax. These bonds are specifically meant for the investors who have earned long term capital gains & would like to save capital gains tax on them. However, these bonds do not allow any tax exemption on short term capital gains tax.  

 Companies that issue these bonds (54EC Capital Gain Bonds) enjoy high credit rating as they are mostly government backed entities ,  

Company Name36 MRemark
REC Ltd5.25%Lock In 3 yr
National Highway (NHAI)5.25%Lock in 3 yr

If you sell an asset such as Bonds, Shares, Property etc.,  you must pay tax on the profit earned from it. This profit is called Capital Gains.

Tax paid on this capital gains called as Capital Gain Tax.

Type of Capital Gains :

  • Short Term Capital Gains : If you sell the asset within 36 months from date of purchase (12 month for Shares & Mutual Fund)
  • Long Term Capital Gains :  If you sell the asset after 36 months from date of purchase (12 month for Shares & Mutual Fund)

 Rural Electrification Corporation  REC  :  

Rural Electrification Corporation (REC), was incorporated on July 25, 1969 under the Companies Act 1956. REC is a wholly owned Government of India, Public Sector Enterprise with a net worth of over Rs. 11104.25 Crore as on 31-03-2010. Its main objective is to finance and promote rural electrification projects all over the country besides providing assistance for generation projects, transmission and distribution projects. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them.

National Highways Authority of India – NHAI

The National Highways Authority of India was constituted by an act of Parliament, the National Highways Authority of India Act, 1988. It is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental thereto. 

  • India’s largest ever highways projects.

 

Capital Gain BondsREC - Series XNHAI - Series XVII
Face Value1000010000
Min Application Sizeone bond one bond
Max Application SizeFive Hundred BondFive Hundred Bond
Maturity3 year3 year
Coupon Rate5.25%5.25%
Interest PaymentAnnual (payble 30th June)Annual
Date of AllotmentAt the last day of each monthAt the last day of each month
Credit RatingCRISIL- AAA FITCH- AAACRISIL- AAA FITCH- AAA
w.e.f. 1 Dec 2016w.e.f. 1 Dec 2016

As per provisions of Income Tax Act, 1961, any long term capital gains arising from 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 3 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 3 years from 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.

Who Can Invest :  Resident individuals, HUF, Non Resident Indian can invest in this bonds

Investment Amount :  You can invest minimum 10000 and maximum 50 lakh in this bond

 Interest Rate : Interest rate in this bond is 5.25% p.a.

Tenor : This bond is for 3 years.

Loans/Lockin : No loans again this bonds. Bond can not be pledged, sold or transfer before completion of three years from purchase of bonds.

Tax  (TDS) :  No TDS deduction under this bonds,  but the interest earned this bond is taxable. You will pay tax on the interest income.

Mode of Holding : These bonds can be subscribed in Physical and Demat form

In this section we will learn how to calculate Cost Inflation Index & calculate Capital Gain Tax.

 COST INFLATION INDEX  TABLE – 

F.Y. INDEX F.Y INDEX F.Y. INDEX
1981-82 100 1992-93 223 2003-04 446
1982-83 109 1993-94 244 2004-05 480
1983-84 116 1994-95 259 2005-06 497
1984-85 125 1995-96 281 2006-07 519
1985-86 133 1996-97 305 2007-08 551
1986-87 140 1997-98 331 2008-09 582
1987-88 150 1998-99 351 2009-10 632
1988-89 161 1999-00 389 2010-11 711
1989-90 172 2000-01 406 2011-12 785
1990-91 182 2001-02 426 2012-13 852
1991-92 199 2002-03 447 2013-14
 939

2015-16  –  1081

2016-17 –   1125

 

Formula of Calculation Capital Gain Tax

Cost Inflation Index = ( Index for the year of Sale / Index for the year of purchase) *  Purchase Cost

For example,

MR.  A   purchase Property  in 10 Jan 01 for 15,24,000  and  sold  it on 15 Dec11 for 35,05,000

  • Purchase Cost      : 15,24,000
  • Sale Cost                :  35,05,000
  • 2000-01 Index  :    406
  • 2011-12 Index   :     785
Find out Capital Gain ,  first calculate Cost Inflation Index

Cost Inflation Index  =  ( 2011-2012 Index / 2000-01 Index ) * Purchase Cost

=  ( 785/406) * 15,24,000

Index Cost of Property     =       29,46,650

Now calculate your Capital Gain

Capital Gain        =  Property Sale Price – Index cost of property

=  35,05,000 – 29,46,650

Capital Gain        = 5,58,350

Capital Gain Tax  = 20 %  of Rs. 5,58,350  ie. 1,11,670 ( +surcharge ,cess if applicable)

If you are invested   5.60  lakh in Capital Gain Bond , then your tax liability is Zero

Under indexation you are allowed by law to inflate the cost of  your asset by a Govt. notified inflation factor. This Inflation factor called as Cost Inflation Index.  This Inflation Index is used to artificially inflate your asset price.

1. Investor are required to submit the application form duly filled along with necessary document at the specified Collecting Bankers.

2. The Form should be filled in BLOCK LETTERS.

3. The cheque should made payable in favor of ;

     For REC Bond –        “Rural Electrification Corporation Ltd – 54 EC Bonds”

    For NHAI Bond –     ” National Highway Authority of India “

For Online / offline purchase of these bonds : Mail me for details :

rajendra@puneinvest.com

NHAI CAPITAL GAIN BOND  – 

Registrar Name  :  M/S Beetal Financial & Computer Services (P) Ltd

Address                :      Beetal House , 3 rd floor, 99 , Madangir,

Behind Local Shopping Center, New Delhi – 110062.

Email ID               :     beetalrta@gmail.com

Contact No.        :    011-29961281/82/83

Fax No                  :    011-29961284

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update link shortly

REC  Allotment Link -Check here  REC – 54 EC Capital Gain Bond

Just type application no and investor name then you can find out your allotment status

NHAI Allotment  Link not available at Registrar site . For checking your status of allotment call or mail to Beetal  Here is link for Beetal  

[EXPAND Can I take Short Term Capital Gain Benefit? ]

No. Exemptions are not available for short term capital gains. So you can’t buy Capital Gain Bonds.

 

  • For Investment in  54 ec Capital Gain Bond ? – Write us rajendra@puneinvest.com or  call Rajendra : 77 1991 7444