The benefit under section 54EC can be availed of only if there is an income from a capital asset, being long-term in nature. Long-term capital gains are the profit that a person makes when he sells any capital asset (for example, any immovable property, jewellery or shares) which he has held for a period exceeding three years. An exception is his holding of shares in which the holding period has been fixed at one year.

Any person (including NRI out of NRO account on a non-repatriable basis) and Hindu undivided family (HUF), through its Karta, can make investments (not exceeding Rs 50 lakh in a given financial year) in the two bonds notified by the Government of India. In case only part investment is made, the amount of deduction gets reduced in proportion to the investment.

The two corporations which have been notified by the Government of India as being eligible for issue of these bonds are (a) National Highway Authority of India (NHAI) and (b) Rural Electrification Corporation (REC).

These bonds carry a lower rate of interest as compared to other investment options, such as Public Provident Fund, bank fixed deposits and National Savings Certificates, among others. The main reason for this lower rate of interest is that the investor gets the benefit of reducing his income tax liability upon investing in these bonds, if he has long-term capital gains. These bonds are issued for a fixed maturity period of three years. These bonds have been rated as “AAA/Stable” by Credit Rating and Information Services of India (CRISIL).

The investment has to be made within six months from the date of the transfer in order to be eligible for claiming the benefit of deduction under section 54EC. The face value of these bonds is Rs 10,000, and the full amount has to be paid upfront along with the application.

The maximum amount that a person can invest in these bonds (NHAI and REC combined) in any financial year is Rs 50 lakh. If a person has long-term capital gains which have accrued to him after 1 October of any year, and the amount of capital gains exceed Rs 50 lakh, he can split his investment by investing Rs 50 lakh up to 31 March of the following year and the balance on 1 April of that year. The balance amount in this case, however, should not exceed Rs 50 lakh. By doing this, he can have the benefit of investment of up to Rs 1 crore. Joint applications shall also be included for the purposes of this limit.

The deemed date of allotment is the last date of the month in which the application is made and the amount is realised by the issuer.

These bonds can be held in dematerialised form or in physical form. The bonds can be held under a single name or joint names. The facility for nomination is also available on these bonds. These bonds are non-transferable, non-negotiable and cannot be offered as security for any loan or advance. However, transmission of the bonds to legal heirs in case of death of the bondholder is allowed under the rules.

The NHAI bonds carry interest at 6.25 per cent per annum, payable annually on 31 March every year. REC bonds carry interest at 5.75 per cent per annum, payable annually on 30 June every year. The interest earned on these bonds is fully taxable under the head “Income from Other Sources”. No tax at source would be deducted from the interest on these bonds.

(Republished with amendments.)

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75 responses to “Tax benefit under section 54EC on long term capital gain”

  1. VS Murthy(VEESEM) says:

    Hi,
    My indexed value of my sold house is 60 Lakhs. I have sold the house at 150 Lakhs and reinvested Rs 65 lakhs for an apartment.Please tell me what will be my LCG nad what other investments canbe made to avoid Capital Gains Tax
    Regards

  2. rtiku says:

    Dear Sir,

    Require advise on the following.

    Had purchased a land piece in 2011 and sold in July 2015.
    The net sale value was 10Lakhs and the LTCG (after considering indexation) is 5L.

    Please advise for:
    1. Do I have to invest 5L or 10L for purchase of residential property for avoiding payment of LTCG tax
    2. Since I have to open a Capital Gain account before 31/07/2016, do I have to put in the entire sale amount (10L) or only the Capital gain amount (5L) into the account.
    2. If I purchase a under construction property, does the registration need to be carried out within 2yrs (July 2017) or the possession has to be completed.
    3. In case the property purchased is say 20Lakhs and by July 2017 I pay 5L/ 10L to buider but construction is still not over, will that serve the purpose.
    4. In case I decide not to invest further, I can pay the tax on capital gain amount by July 2017 or earlier. And will I be liable to pay some penalty on the tax amount.

  3. Vishvender Singh says:

    i have invested in 54ec bonds in NHAI they will get mature next month .can i transfer this money to my mother

  4. ADNAAN MALIK says:

    HOW TO INVEST IN 54EC NOTIFIED BONDS, WHAT IS THE PROCEDURE..??

  5. Sunil says:

    Dear Sir
    54EC Bonds of mine will get matured end of Feb 2016 but I have Indian income tax enquiry currently going on. Will my payment will be affected by this. I am NRI
    Thank you for your help
    Reads
    Sunil

  6. ARVIND GUPTA says:

    CAN A PVT. LTD. COMPANY AVAIL THE BENEFIT OF SECTION 54EC?

  7. megha says:

    our assessee has invested Rs.30laks u/s 54EC whether interest received on these bonds can be shown as income from Long Term capital gain??

  8. megha says:

    Our assessee has invested Rs.30 Laks u/s 54EC. Whether interest received on these bond can be shown as income from Long Term Capital Gain??

  9. Anthony says:

    I purchased a house plot in 2000 for Rs.55,000 and sold it under govt. acquisition in December 2014 and rcvd. the sale proceeds of Rs.564000 in Feb. 2014 . I have not purchased a house instead I purchased another house plot out of the sale proceeds in May, 2014. Whether the amount invested in purchasing another plot is exempted from tax. Or should i purchase a house within two years or construct a house within three years? Please advise me the procedure.

  10. paul says:

    Dear Sir, I am planning to sell my jewels and buy apartment, do I have to pay taxes on my jewels?
    Note: All the money (including profit) from the sell of the jewels will go into buying the apartment.

    Thanks
    Meenap

  11. Shyamkumar Varma says:

    Is it OK to invest the entire consideration amount so received by selling the long term capital assets i.e. land (acquired by way of inheritance and acquisition cost not known) in Sec-54EC NHAI or REC bonds? Is there any penalty for investing entire sale consideration in Sec-54EC NHAI or REC bonds?

  12. T L P Raju says:

    I happened to invest Rs. 44.00 Lakhs in REC Capital Gain Tax Exemption Bonds on 14/03/2013. Please clarify, the interest being paid annually after 30th June is tax free or taxable. After lock-in period of 3 years will the principle amount of Rs. 44.00 Lakhs will be automatically paid to me or do we have to separately request for it?

  13. RAMAKANT says:

    SIR,
    IF I SALE MY ANCESTRAL PROPERTY CAN I INVEST THE AMOUNT FOR CAPITAL GAIN INVESTMENT BONDS FOR A PERIOD OF THREE YEARS IS THAT AMOUNT IS TAXABLE? I AM A GOVT. SERVANT.
    1. Suppose if I Invest Rs.25 Lacs in Sec-54EC REC Bond and after 3 years say the bond amount of Rs.25 Lacs will mature whether that is again taxable or that amount is fully tax free
    2. if the amount acquired from selling a LAND has not been put in the capitals gain tax savings bond within six months of selling the PROPERTY, then what is the procedure to be followed for exemption from capitals gain tax.is there any way out for capital gains tax exemption.can anyone please give some advice.will there be any use if the amount is put in a capitals gain tax savings bond after 1 YEAR of selling
    LAND.
    3. can i invest the same amount for purchasing the property on my name.
    4. i have to show that amount at the time of filling returns
    THANKS

  14. rajesh says:

    after maturity of NHAI bond do i need to invest in property or bond again for tax extemption
    can i take these bonds on my wife’s name to save tax on interest…she is housewife
    thanks

  15. Kiah W says:

    What are the tax exemptions for nri senior citizens on long term capital gains

  16. Preeti says:

    Whether Interest on REC bonds is taxable or Exempt??

  17. jotpreet says:

    sir,
    can u plz tell that after the expiry of bonds after 3 years whether the princpal amt is tax free or again we have to invest that amount into some property
    Regards
    jotpreet singh

  18. RAVI says:

    DEAR SIR, You told Joint applications shall also be included for the purposes of this limit. Who will liable to pay TAX and also file IT Return – Either 1 applicant or 2nd applicant.

  19. Ashutosh K says:

    Hi,
    My mother is selling a property (25 year old property) for 25L rs. we presently have no plans of reinvesting in another property. So if she puts all the amount received in NHAI or REC bonds, would she be completely exempted from the Income-tax that the amount would otherwise attract. (Age 55 year, Occ.: housewife) What forms or documents have to filled for the exemption (54EC I believe). She does submit 15G every year. Kindly let me know!
    Thanks.

  20. Kiran says:

    One of my friend has purchased (& is currently occupying the same)a residential property for Rs.90 Lacs during FY 14-15.He took a home loan of Rs. 90 Lacs on the said property.
    He has vacated the property where he was staying prior to purchase of above property. This property is currently loan free. He was staying here for 10 years.
    Both the properties are jointly owned by he and his wife. My query is that whether by selling the vacated property and paying the proceeds thereof for part closure of home loan availed against another property where he is currently residing can he still get benefit from long term capital gain ?

    Also if the sales proceeds of vacated property are taken by one of the person in his individual bank account, will there be any issue from income tax perspective ?

  21. kamal says:

    If we park money in the CGAS WHAT IS THE RATE OF INTEREST & WHAT IS THE TAX LIABILITY ON INTEREST

  22. pranab says:

    Sir,

    My friend having Demat A/C and he is ready to purchase Capital Gain(REC) Bond for investment after sold his vacant land due to capital gain. But REC Bond one clause is there that “I/We confirm that I/We do not hold any Demat Account”.

    Pl let me know whether He can Purchase this Bond …

    Thanks

  23. V.Ramanathan says:

    Please inform if the amount invested in Bonds for avoiding CG tax are taxable on redemption?

  24. ashwin says:

    Hello sir,
    Please guide, where can I buy government bonds for Capital gain tax.
    When I inquired with SBI and HDFC they said those bonds are not available in market right now.
    Pls suggest. Thanks
    Ashwin

  25. santhiya says:

    agriculture land sold for 1cre thn 50l invested in other capital gain nd other 50l invested in fd .for tat fd did v had tax

  26. Suelan says:

    Dear Sir,

    My friend sold his house in Sept 2014 for Rs. 46 lacs and the capital gains is Rs. 23 lacs. If he invests in 2014 for a flat worth Rs. 35 lacs, what is the balance tax liability and can he pay that after a period of 3 years.

  27. HARPREET says:

    WHETHER MATURITY OF NHAI BOND IS TAXABLE I.E. 50 LAC WHAT HAPPENED AFTER 3 YEARS WHEN NHAI BOND REDEEM. AFTER MATURITY/REDEMPTION OF BOND 50 LACS WILL HAVE TO BE INVESTED IN PROPERTY OR NOT

  28. Raju says:

    Hi,

    Interest received on REC Capital Gain Bonds taxable on receipt basis (the year in which interest received) or on accrual basis?

    Thanks

  29. Rahul Yogi says:

    Dear Sir,

    I am a co-owner of 2 similar residential apartments with identical holding structure along with my motehr & borther. Both the properties were bought in 1994. Out of the 2 properties, one was sold in Dec 2012 & with the sale proceeds, a new apartment was bought in Jan 2013 thus availing the benefits of LTCG for tax exemption.

    However my query relates to the 2nd property which also we want to sell now. Whether we will be eleigible for LTCG under Section 54 for tax exemption,if the sale proceeds are re-invested in a residential apartment within the time frame of 2 years or is there any restriction if a
    person or person(s) have held & sold more than one residential property.

    Best Regards
    Rahul Yogi

  30. amitabh sharma says:

    Hi,
    Suppose if a person sold his property in Rs.45 lacs and he bought a new property of Rs.15 Lacs
    remain Rs.30 Lacs Invest in Sec-54EC REC Bond on January 2012 and after 3 years say Jan-2015
    the bod amount of Rs.30 Lacs will mature whether that Rs.30 Lacs is again taxable or that
    amount is fully tax free? please give me reply..

  31. M BALANI says:

    SIR, ONE OF MY FRIEND SOLD HIS HOUSE PROPERTY AT  17.00  ON 15/04/2014, AND PURCHASED NEW PROPERTY IN FEB-14, (OUT OF ADVANCE MONEY HE HAD RECEIVED).
    FOR RS. 800,000/-
    1) SHOULD HE SHOW IN IT RETURN FOR A.Y. 2014-15 REGARDING PURCHASE OF PROPERTY AND SALE OF PROPERTY  (WHICH WAS COMPLETED IN APRIL 14)  ?
    2) IF HE INVESTS BALANCE OF 900,000/- IN REC BONDS, WILL HE GET EXEMPTION U/S 54/EC ???

  32. VISVESVARA, M. K. says:

    I am a very Sr. Citizen. My estimated income for the assessment year  2015-16   including the LTCG is below tax exemption limit of Rs 500000. Is LTCG  taxable?
    Visvesvara, M. K.

  33. VISVESVARA, M. K. says:

    By sale of a vacant site under jurisdiction of a town panchayat council fetches me a LTCG of Rs 37452 Which i want to invest in 54EC Bonds of Rs10000 per bond, but what to do with Rs 7452 which is less than bond value. Can this be rounded of  to next Rs 10000 for investment in 54EC bonds?
    Please advice.
    Visvesvara, M. K.

  34. sidhi says:

    investment in 54 ec bond is within 6 mnths from date of registration of sale or from date from date of transfer of amt….wat if amt transfered first and then registration occurred

  35. Deepak Maniar says:

    My mother purchased Bond under 54 EC. Before maturity she expire then nominate can withdraw before maturiy ? How much duration is mandatory after investment if owner of the investment under 54 EC expired ?

  36. amitabh sharma says:

    Hi,
    Suppose if a person sold his property in Rs.45 lacs and he bought a new property of Rs.15 Lacs
    remain Rs.30 Lacs Invest in Sec-54EC REC Bond on January 2011 and after 3 years say Jan-2014
    the bod amount of Rs.30 Lacs will mature whether that Rs.30 Lacs is again taxable or that
    amount is fully tax free?

  37. MAHESH DIKE says:

    Dear Sir ,
    If Long term Capital Gain on sell of Residential flat is more than Rs 50 Lacs can i invest Part in bonds ( below Rs 50 Lacs) and part in purchase of new residential flat.
    Please advise

  38. Raju says:

    Hi,

    Interest received on REC Capital Gain Bonds taxable on receipt basis or accrual basis?

    Thanks

  39. PRAKASH KRISHNAN says:

    Exemption under 54EC is limited to Rs.50 lacs and not Rs.1 Cr by investing in two financial years as stated in the article. ITAT has disallowed such interpretation of Act.

    • ibnsuleman bhai says:

      please let me know what the truth is finally. can 1 crore be invested by splitting 50 lacs for each financial over which the 6 months period spread over

  40. ibnsuleman bhai says:

    After completing 3 years if I sell my flat in such a way that capital gain is zero after availing of indexation benefit and thus receive 130 lacs.Will there be any other tax on it? or it will be tax free totally in my hand with no legal conditions asto where I invest it.
    Note this flat was bought to save capital gain.Thanks.

  41. ibnsuleman bhai says:

    Sir,I am to receive my amount in REC on 15th April 2014 that was invested to save capital gain.Is this amount tax free in my hand? Interst thereon was taxable added to my other taxable income.
    If I sell a property in this month or say end December 2015 for 1 crore can I invest 50 lacs in the financial year of sale and 50 lacs in the financial year that follows it,thus total 1 crore against one sale of property,will my capital gain tax be zero?

  42. sk says:

    hi
    Can anyone pls give me some advice.
    if the amount acquired from selling a house has not been put in the capitals gain tax savings bond within six months of selling the house, then what is the procedure to be followed for exemption from capitals gain tax.is there any way out for capital gains tax exemption.can anyone please give some advice.will there be any use if the amount is put in a capitals gain tax savings bond after 9 months of selling

  43. Chandrakant says:

    Can I invest my Long Term Capital Gain Tax for Vacant Plot or Land?

    Pl also update me with hoe to reflect the gain ITR-2, with proper speciman.

    Regards

    CS Choudhari

  44. Pavitra says:

    Hi,

    I had a RSU of MNC company. I had sold and incurred capital gains from the same this year. Can i invest in the bonds under 54EC bonds and claim the exemption.

    Can anyone please clarify?

  45. ramesh says:

    i sold commercial proeprty and i purchased a residential house. if i can take exemption on capital gain.

  46. nita says:

    My Capital Gains Bonds of 6% mature in August 2014 .Is the interest on these Bonds tax-free??
    Is the Bond amount of Rs.50 lacs to be compulsarily re-invested???
    Is the long-term gain tax to be re-invested as per IT rules?
    please enlighten me.
    i am a senior citizen female.
    Thank you.

  47. Roy says:

    Hi,

    Is the LTCG bonds on maturity, taxfree or taxable?

    Is there a provision to re-invest on its maturity for another term?

    Can I invest on maturity the complete bond value on to a new property?

    If not taxable, can I use this bond value on maturity for any other tax exemptions schemes?

    Appreciate your advice/response to the above queries please.

    Thanks,
    Roy

    • Deepak says:

      If I invest the capital gains from the sale of residential property and invest the same in a new construction where the builder delays delivery ,will I have to pay taxes on capital gains?

  48. Sanjay says:

    Hi,

    Suppose if a person sold his property in Rs.45 lacs and he bought a new property of Rs.15 Lacs remain Rs.30 Lacs Invest in Sec-54EC REC Bond on January 2011 and after 3 years say Jan-2014 the bod amount of Rs.30 Lacs will mature whether that Rs.30 Lacs is again taxable or that amount is fully tax free?

  49. prabha sekhar says:

    we are nri , we sold our house , capital gain is 50 lakhs. we will deposit this money in nro account , and invest in 54EC bond . After 3 yrs we want to repatriate
    that amount ( 50 lakhs + interest )back to usa.Is there any condition/rules I can not repatriate ? .
    Thanks.

  50. navjeet says:

    pls tell me the rec capital gain BONDS are made available to customer in how much time

  51. shanmugaram says:

    hi sir,

    i have got a long term capital gain of rs 8 lakh on 17 th of october 2011,
    i already have another property in my name , so i can not avail the reinvestment exemption,.
    i wan not aware of the 54ec exemption plan, now i am about to do the filing it is nearly 11 months after the transfer was done ., please advise me on how to save the capital gain tax.,

    thank u in advance..!

  52. dilip says:

    I am an individual holding property under category other than residential . I intend to dispose the same. with the proceeds i will bye a residential house. even then i left with some amount for disposal. can i  invest the same under  section 54EC. so as not to attract capital gain.  

  53. Sivakumar B says:

    You have mentioned that I can park the Long Term Capital Gain out of a House selling in the capital gain saving account. After partking the amount say for 1year am I allowed to invest in 54EC bond and still claim excemption on LTCG.

  54. Dilbagh singh says:

    My income is 5.75 lakh ,how much income i can invest in lic and bond to save income tax.

  55. Vidya devi says:

    I need a information about LTCG Tax Free Bond of REC undre sec. 54 EC. I need to invest Rs. Five lakh in such bonds.These bond can be purchase from any bank  saving account or  require to open another Capital Gain deposit account in nationalised bank only.Please  give me this information.

  56. Abani says:

    I need a clarification about maturity proceeds, whether it is taxable or not?

  57. dilip yashwant phatak says:

    please give me latest information about 54ec exemption up to 1 crore investing in two financial years

  58. dilip yashwant phatak says:

    Please give me latest news about investing Rs.One crore in different financial years

  59. Suresh says:

    Whether amt. received on the maturity of 54EC bonds are taxable?

  60. vkjain says:

    In budgrt 2013, is INTEREST rate on capital gain BONDS maintained at 6% per annum or ANY CHANGE IS PROPOSED in INTEREST RATE. kindly advise on my mail id: vk.jain@yahoo.co.in …Thanks

  61. vkjan says:

    In budgrt 2013, is INTEREST rate on capital gain BONDS maintained at 6% per annum or ANY CHANGE IS PROPOSED in INTEREST RATE. kindly advise…Thanks

  62. vswami says:

    “If a person has long-term capital gains which have accrued to him after 1 October of any year, and the amount of capital gains exceed Rs 50 lakh, he can split his investment by investing Rs 50 lakh up to 31 March of the following year and the balance on 1 April of that year. The balance amount in this case, however, should not exceed Rs 50 lakh.”

    ITAT Says ‘No’.

    See recent order in  ACIT vs. Raj Kumar Jain & Sons (HUF) (ITAT Jaipur)

    The view the Tribunal has taken is seen to be very well reasoned and based on sound logic.

    What requires a special noting is that, .the suggestion to the contrary , if followed as a matter for tax planning, and  especially, for paying advance tax, the taxpayer is most likely to be assured of a long drawn battle with the Revenue. Based on such a suggestion were he to make an investment,  he is quite likely  to meet  the proverbial fate of  falling  between 2 stools.

  63. ASHOK SARVAIYA says:

    Pl give the case law for investment of Total  Rs. 1 Cr allowabel. i.e Rs. 50 Lacs in One Financial & Another Rs. 50 lacs in next financial for sale of One Capital Assets in November/December.You 

  64. Ashit says:

    Can you tell me what will be effect when Pvt. ltd co. transfer bonds u/s. 54EC to LLP with in 3 years….??? Can LLP can continue the same for balance years and is there will be any CG on such transfer…???? because such transfer is not taxable u/s.47 if conditions are satisfied. .??

  65. kamlesh shah says:

    I have purchase 4 agri land in 1980 to 1990 & in 1997 i goes for non agriculture & sold around 100 plots in 2008 & 2009.and the sell amount recieved was invested in 54 ec. so i want to clarify that whether capital gain is there or it is a business income. reply me soon

  66. NAGAMOHAN says:

    Suppose if a person Invest Rs.50 Lacs in Sec-54EC REC Bond on January 2011 and after 3 years say Jan-2014 the bod amount of Rs.50 Lacs will mature whether that Rs.50 Lacs is again taxable or that amount is fully taxfree.

  67. kishore surana says:

    income on agriculture land on sale not capital gain

  68. narahari says:

    i invested an ammount of Rs 10,80,000 in NHAI bonds in oct 2009 and i got interest of an ammount Rs 26,000 for the period 2009-10. under what section i can claim IT rebate for the interest ammount

  69. Bonson says:

    Hello,

    I had 2 questions:

    1. My father had some agricultural land which was transfered to my mother;’s name after his demise. My mother sold the land for Rs. 10 Lacs.

    Is sale of agricultural land considered as Capital gain?

    2. From where can I purchase these NHAI or REC bonds?

    Best Regards,
    Bonson

  70. Gautam says:

    Hi,
    If the amount is more than 1 Cr. then you have to open a Capital gains AC in a nationalised bank, and then purchase a resi property within 2 yrs or construct one with 3 yrs from the date of sale of your property. Even after that if some money is not utilised for the above, a flat rate of 20% tax is payable.

  71. A.K.SHAH says:

    YES, THANKS.
    HOWEVER WHAT ABOUT THE AMOUNT MORE THAN 1.00 CRORE, I UNDERSTNAD IT IS TO BE IN SPECIAL A/C OF BANK CGAR SCHEM.
    CAN THIS ADDITIONAMOUNT CAN BE INVESTED IN RES PROPERTY EVEN AFTER 2 YEARS?
    WHAT IS THE PROCEDURE FOR WITHDRAWING AMOUNT FROM THE BANK OF CFGAR A/C? CAN WE PAY TAX AFTER WITHDRAWL ?
    PL. LET ME KNOW …
    THANKS

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