Capital Gains Bonds (Form 54EC)
Companies that issue these bonds enjoy high credit rating as they are mostly government backed entities& they come with a minimum lock-in period of 3 years. Interest earned on these bonds are not tax free & are taxed at marginal rate of income tax as per the tax slab you fall into, however there is no TDS deducted.
Who should buy Section 54EC Bonds?
- These bonds are specifically meant for people who have made some long term capital gains, and would like to save capital gain taxes on this amount.
- Those desirous of availing exemption from capital gains tax under Section 54 EC may invest in these bonds.
What are the Provisions related to Capital Gain Bonds
Which bonds are eligible under the Section 54 EC?
Key features of Section 54 EC bonds are:
- Highest credit rating of AAA by CRISIL, CARE and FITCH.
- Interest is taxable although no TDS is deducted
- Lock-in of around 3 years and non- transferable
- Minimum amount of investment Rs 10,000 and multiples