54EC bonds Commonly referred to as capital gains bonds are one of the ways to save long-term capital gain tax. 54EC bonds are specifically meant for investors earning long-term capital gains and would like tax exemption on these gains.
According to section 54EC, any person (individuals, HUFs, partnership firms, companies, etc.) can avail exemption in respect of long-term capital gains (arising from the sale of long term capital assets other than equity shares and securities), if the capital gain is invested in Capital Gain Bonds.
1) Safe and Secure: 54EC bonds are AAA rated and are issued by PSUs backed by the Government of India.
2) Interest Rate: 54EC bonds offer a 5% rate of interest payable annually.
3) Tax implication: Interest on 54EC bonds is taxable. The principle is tax-free on maturity.
4) Tenure: 54EC bonds have a lock-in period of 5 years and are non-transferable.
5) Investment amount: Minimum investment in 54EC bonds is 1 bond amounting to Rs. 10,000 and the maximum investment in 54EC bonds is 500 bonds amounting to Rs 50 lakhs in a financial year.
6) Mode of Holding: 54EC bonds can be held either in Physical form or in Demat Form.
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