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 Name||36 M||Remark|
|REC Ltd||5.25%||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 Bonds||REC - Series X||NHAI - Series XVII|
|Min Application Size||one bond ||one bond|
|Max Application Size||Five Hundred Bond||Five Hundred Bond|
|Maturity||3 year||3 year|
|Interest Payment||Annual (payble 30th June)||Annual|
|Date of Allotment||At the last day of each month||At the last day of each month|
|Credit Rating||CRISIL- AAA FITCH- AAA||CRISIL- AAA FITCH- AAA|
|w.e.f. 1 Dec 2016||w.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 –
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
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 :
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 : firstname.lastname@example.org
Contact No. : 011-29961281/82/83
Fax No : 011-29961284
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.