Filings for AY 2023-24 have been stopped. We will notify you once ITR filings for AY 2024-25 are enabled. Products ~ = Filing for AY 2024-25 is coming soon Keep calm and sign up for early access to our super filing platform Enter your email Sign me up Le HOME > INCOME-TAX > CAPITAL-GAINS™ >> SECTION S4éC~ Section 54EC- Deduction on LTCG Through Capital Gain Bonds Updated on: Jun 9th, 2023 [7 min read ®©OOO® CONTENTS [ Show] Selling capital assets and making a profit will result in taxation on those profits as capital gains. Nevertheless, there is a way to avoid this tax by investing the profits into specific assets. This is typically known as Capital gains exemption. We will be discussing one such exemption given under Section 54EC in detail Section 54EC When a taxpayer sells long-term immovable property (land or building), they have File NowFilings for AY 2023-24 have been stopped. We will notify you once ITR filings for AY 2024-25 are enabled. 1O Be engiwie ror exeMpUCN UNGer SeCUOTI O4CU, Une LaxpUyer muse meet Ure following conditions: * The exemption under Section 54EC can be claimed by any taxpayer, including individuals, Hindu Undivided Families (HUFs), companies, LLPs, firms, and others. The asset being sold should be a Long Term Capital Asset, which includes land or building or both. The asset is considered long-term if the taxpayer has held it for a minimum of 24 months prior to the sale. The taxpayer must invest the Capital Gains within 6 months from the date of transfer. The investment should be made in 54EC bonds: National Highways Authority of India (NHAI), Rural Electrification Corporation (REC), Power Finance Corporation Limited (PFC) bonds, or Indian Railway Finance Corporation (IRFC) Limited bonds. The total investment amount cannot exceed INR 50 lakhs during the current financial year and the subsequent financial year. Bonds eligible for exemption under section 54EC of the Income Tax Act * Rural Electrification Corporation Limited or REC bonds, * National Highway Authority of India or NHAI bonds, * Power Finance Corporation Limited or PFC bonds, * Indian Railway Finance Corporation Limited or IRFC bonds.Filings for AY 2023-24 have been stopped. We will notify you once ITR filings for AY 2024-25 are enabled. To avail the tax-exemption the investment must be made within 6 months of the date of sale of immovable property. Such investment can be redeemed only after 5 years. Before april 2018 the bonds could be redeemed within 3 years. The exemption on investment is allowed only against long term capital gains on sale of immovable property (i.e. sale of land or building). The exemption is available up to a maximum amount of Rs 50 lakh How to calculate the tax exemption by investment in tax saving bonds Assuming that an immovable property is sold at Rs. 70 lakh after a long term period of 42 months from the date of acquisition. The indexed cost of acquisition is 46 lakh and indexed cost of improvement is Rs. 10 lakh, Calculate the capital gain that is taxable after claiming exemption in below two cases: I. Rs. 14 lakh invested in REC bonds within 6 months Il. Rs. 8 lakh invested in NHAI bonds within 6 months |. Rs. 14 lakh invested in REC bonds within 6 months Amount (De)Filings for AY 2023-24 have been stopped. We will notify you once ITR filings for AY 2024-25 are enabled. Long-term capital gain Less: Investment in REC bonds Taxable long-term capital gain IGlakh 14 lakh Nil Il. Rs. 8 lakh invested in NHAI bonds within 6 months Particulars Sale consideration Less: Indexed cost of acquisition Less: Indexed cost of improvement Long-term capital gain Less: Investment in REC bonds Taxable long- rm capital gain Amount (Rs.) 70 lakh 46 lakh 10 lakh I4lakh 8 lakh 6 lakh In case if the capital gain bonds are converted into cash before the period of maturitv. then the amount so invested on which tax exemption was claimed. shall beFilings for AY 2023-24 have been stopped. We will notify you once ITR filings for AY 2024-25 are enabled. How to make investment in 54EC bonds These bonds are not listed in the stock exchange. Hence you can buy them by the issuer directly either in a demat form or a physical form. Let us understand how to invest in the above mentioned bonds: * Step 1: Download the respective bond Form from here - * REC bond ¢@ NHAI bond © PFC bond RFC bond Step 2: Choose the’ direct’ option on the download page. Step 3: Select the number of forms to download. Step 4: Enter the captcha and download. Step 5: The form downloads in ZIP format. Step 6: Unzip and extract the form Step 7: Print the form and fill as per the given instructions. Step 8: Investors should attach either a demand draft or account payee cheque and necessary enclosures at the designated branches of collecting banks ~ Axis Bank, Canara Bank, State Bank of India, HDFC Bank, ICICI Bank, IDBI Bank, Indusind Bank or Yes Bank.