Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing. In case if the capital gain bonds are converted into cash before the period of maturity, then the amount so invested on which tax exemption was claimed, shall be taxable as long-term capital gain in the year of conversion. The 54ec capital gain bonds are tax exemption bonds, allow you to avoid paying tax on capital gains arising from selling property. These bonds continue to be tax exempted, and no tax is deducted at the source. However, the interest gained is taxable and must be mentioned during the tax return filing.
- According to Section 54EC of the Income Tax Act of 1961, investors can shield their long-term capital gains from taxation by investing in specific 54EC Bonds within six months of selling assets like property or stocks.
- Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
- Financial instruments can be divided into two types – market-linked financial instruments and fixed-income financial instruments.
- If the individual fails at investing within the specified time frame, he/she can also deposit the amount in a Public Sector Undertaking (PSU) bank.
Check out our Tax Planning Optimizer tool that helps you save taxes beyond Section 80C. Yes, the exemption under Section 54EC can be claimed multiple times related to the same property, subject to the overall limit of Rs.50 lakhs per financial year. According to Crisil, PFC and REC have dominant bookkeeper accountant cpa what is the difference positions in power sector financing space and have strategic importance due to Government of India (GoI) ownership. However, most of its clients are from the power sector, including discoms, who do not necessarily have strong asset quality. Ratings agencies opine that IRFC is favourably placed as it derives most of its business from GoI.
Understanding Capital Bonds: A Comprehensive Guide to 54EC Bonds for Indian Investors
Individuals, as well as corporations, can sell their bonds in this market and generate capital gains. Another factor that adds to the lower demand of these bonds is the capital gains bonds interest rate (5.25%) which is comparatively lower than other investment avenues. Financial instruments can be divided into two types – market-linked financial instruments and fixed-income financial instruments. Market-linked financial instruments consist of equity shares, equity-oriented Mutual Funds, etc. Fixed-income instruments include government bonds, debentures, fixed deposits, etc.
Edelweiss Financial Services Limited- A Review of Bond Public Issue
As Y would receive 5.25% on Rs. 50,00,000, her total income from that bond on maturity would be Rs. 63,12,500. Z’s earning, on the other hand, would be calculated on 10% which would make her total income on maturity Rs. 55,31,250. When a taxpayer sells long-term immovable property (land or building or both), they have the option to avail capital gain exemption under Section 54EC by investing in certain bonds.
Key Features of 54EC Bonds
This guide will cover all that you need to know about capital gains bonds under section 54EC of the Income Tax Act. Capital gains exemption allows avoiding tax by investing in specific assets. Section 54EC provides exemption for investing in certain bonds like NHAI, REC, PFC, and IRFC. Calculating taxable capital gains after investment can be done based on the amount invested in different bonds.
They are bonds offered by Rural Electrification Corporation Ltd (REC), Power Finance Corporation Limited (PFCL) and National Highways Authority of India (NHAI), among others. 54EC bonds are popular investment instruments as investing in 54EC bonds allows investors to claim tax deductions on long-term capital gains. If the individual fails at investing within what is owner’s equity the specified time frame, he/she can also deposit the amount in a Public Sector Undertaking (PSU) bank. In that case, the deposit will be viewed as an investment in capital gains bonds in India upon which tax exemption will be available under the Capital Gains Account Scheme, 1988. However, if such deposit does not convert to an investment within 2 years, it will be treated as a short-term capital gain in the year of expiry.
The coupon payment date of PFC is July 31 each year whereas for REC and IRFC the coupon payment date is June 30 and October 15 of each year respectively. Interest in the year 2023 will be paid only to the investors whose allotment will be done by June 30, 2023 for PFC, May 31, 2023 for REC, and August 31, 2023 for IRFC. Now, as the capital gain of Rs. 50,00,000 is exempt from tax, the post-tax amount for it will remain unchanged. In the case of Ms Z, payable tax amount is Rs. 13,12,500 bringing down her taxable income to Rs. 36,87,500.
Tailored for investors seeking to safeguard their capital gains, 54EC Bonds have become a go-to choice in the investment landscape. Let’s delve into the features, benefits, and real-world examples to understand why investors are turning to these bonds. Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, revenue definition and meaning capital gains, business & profession and income from other sources.