Capital Gain Bonds in India: A Smart Way to Save Tax on Long Term Capital Gains
Capital Gain Bonds in India: A Smart Way to Save Tax on Long Term Capital Gains If you have sold a long-term capital asset such as land or building and made a profit, you may have to pay tax on the capital gains. However, there is a way to avoid or reduce this tax liability by investing the gains in certain bonds. These bonds are called capital gain bonds and they offer tax exemption under section 54EC of the Income Tax Act, 1961. What are capital gain bonds? Capital gain bonds are fixed income instruments issued by certain government entities that are eligible for tax exemption under section 54EC. These bonds have a lock-in period of 5 years, which means you cannot sell or transfer them before the maturity date. The interest rate on these bonds is usually around 5% per annum, which is taxable in the hands of the investor. Who can issue capital gain bonds? The following entities are authorized to issue capital gain bonds under section 54EC: National Highways Authority of India (NHAI) R...
