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 (wef A.Y 2019-20, the said long term capital asset shall be land or building or both) which he has held for a period exceeding 24 months. 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 assesse should within a period of 6 months from the date of transfer invest the gains in  Long Term specified bonds as issued by NHAI and REC and notified by the Central Govt (bond issued by power finance corp/Indian Railway Finace Corp). for a minimum period of 3 years (5 years if such bonds are issued on or after 01.04.2018)

In cases where the assesse converts the specified asset into cash, or takes a loan or advance on the security of such specified asset within a period of 3 years (5 years if the investment is made in specified asset on or after 01.04.2018) from the date of its acquisition, the amount of Capital Gain exempt u/s 54EC shall be deemed to be Long Term Capital Gain of the previous year in which the Long Term Capital Asset is transferred or converted into money or on the date such loan or advance is taken.

 The investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. Capital gain shall be exempt to the extent of amount of investment in such specified bonds upto a maximum of Rs.50 Lacs.

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 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 and REC bonds carry interest at 5.75 per cent per annum, payable annually wef 01.04.2018. 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.

Also Read:

Brief Synopsis of Capital Gain Exemption u/s 54, 54EC & 54F

All about Section 54, 54B, 54D, 54F, 54GA, 54EC, 54G & 54GB

Exemption under Section 54, 54EC & 54F -FAQs & case laws

(Republished with amendments.)

More Under Income Tax


  1. Ram says:

    A question: If 54EC bonds are purchased from LTCG NRO funds,after maturity the funds from bonds which will be credited to NRO accounts,can be ‘Remitted’ under 1 M$ allowance or THOSE funds NEVER permitted to be ‘remitted’ from NRO account?
    OR since bonds are brought under term of ‘Non repatriable)?

  2. CA Geetaa Guwalanii says:

    54EC deduction allowed if investment within six months of transfer. There is no restriction regarding investment to be made before the due date of ITR or deposit of amount in specified Capital Gain account..Am i right?

  3. Payal.. says:

    There is a LTCG of Rs. 93 lacs from selling a house property.
    I have invested Rs. 50 lacs in National Highway Bond within 6 months of gain.
    And Rs. 27 lacs in purchasing another house within 6 months of gain.
    How much tax should I pay to government in this case.?
    Will it be legal to avail deduction under both section 54 and section 54EC?

  4. Prerna Jain says:

    My uncle received capital gain of INR 50 lacs by sale of land however, he died before claiming the exemption of section 54EC. Will his wife be able to claim the exemption and how?

  5. Kamlesh Kathiriya says:

    I sold my industrial shed on 26th March 2018. What time I have to buy new house? What time I have to buy REC bond?

  6. C M Muralidhara says:

    1) Whether the tax on Long Term Capital gain earned on sale of property can be calculated without Indexation also for AY2018-19. If yes, what will be the tax rate.
    2) Whether the tax on Interest earned on 3yr lockin Capital Gain Bonds 54EC can be paid each year taking into account notional income like interests on NSCs OR only to be paid at the time of redemption

  7. Amber Sayyed says:

    I Have sold my land on 14.09.2016 and I want to Invest in sec 54EC i.e NHAI and REC Bonds. My question is what would be my last date of investment. Would it be 13.03.2017 from the date of sale or 31.03.2017 i.e till the end of March for the purpose of counting of 6 month?

  8. A D Sardana says:

    I have sold a residential plot in January 2017. I ntend to buy. Capital gain Tax bonds. My question is
    1) Only Capital gain is to be invested or entire sale proceeds are to be invested.
    2) Does REC/NHAI directly sell bonds or through some Bank.
    A D Sardana

  9. ozer says:

    i want to sell my pagdi house n buy an ownership flat. Can I buy the ownership house first with my money on loan N than sell my pagdi house N repay my loan amt from it N get LTCG exemption ? Also can I deposit cash in capital gain tax account? If so is there any limit for it. Can i make an interior out of the money deposited in capital gain tax a/c? Pl advise. Thanks

  10. VS Murthy(VEESEM) says:

    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

    1. KRISHNANKUTTY K says:

      I had purchased 1.10 Acre of agricultural land in Aug 2005 out of my retirement benefits. The land planted with rubber trees. I spent lot of money for its plantation. The land is located in rural area IE out of Municipal area. It is located in Grams panchayatha area. After six years of cultivation I started taping but the prize of raw rubber so less hence I stopped taping. During Feb 2017 I transferred 50 cents out of this land to my wife. On the same month she sold the land for RS 975000/_. Later on Feb 2017 I also sold balance ,60 cents of the land for RS 985000/_. The money is presently in savings accounts of myself and wife on two different accounts. Can I invest our portion of sale proceeds as FD. Please advice .

    2. Deepali Ranga says:

      Out of 1cr20 capital gains. Reinvest in purchasing a flat. How much have to invest in 54EC bond? Can I invest some amount in Ontario decorate which is not done by builder.

  11. 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.

    1. Rohit Bhardwaj says:

      if i purchase NHAI bond to save capital gain and keep it for 3 years, after the locking period whether the tax liability will still remain

  12. 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

  13. 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??

  14. 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??

  15. 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.

  16. 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.


  17. 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?

  18. 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?

  19. RAMAKANT says:

    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 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
    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

  20. 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

  21. jotpreet says:

    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
    jotpreet singh

  22. 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.

  23. Ashutosh K says:

    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!

  24. 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 ?

  25. pranab says:


    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 …


  26. 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

  27. 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.

  28. HARPREET says:


  29. Raju says:


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


  30. 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

  31. amitabh sharma says:

    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..

  32. M BALANI says:

    FOR RS. 800,000/-

  33. 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.

  34. 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.

  35. 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

  36. 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 ?

  37. amitabh sharma says:

    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?

  38. 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


    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.

    1. 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:

    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 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.


    CS Choudhari

  44. Pavitra says:


    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. 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.

  46. Roy says:


    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.


    1. 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?

  47. Sanjay says:


    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?

  48. 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 ? .

  49. 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..!

  50. 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.  

  51. 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.

  52. 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.

  53. 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

  54. 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.

  55. 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 

  56. 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. .??

  57. 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

  58. 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.

  59. 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

  60. Bonson says:


    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,

  61. Gautam says:

    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.

  62. A.K.SHAH says:


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