Capital Gain Bonds

What are Capital Gains Bonds?

Capital Gains Bonds are specialized instruments issued by government-backed entities to help investors save tax on capital gains.

Key Benefits:

1. Tax exemption (u/s 54EC)

2. Fixed interest rate (typically 5-6% pa)

3. Low risk

4. Liquidity

5. Tenor: 3-5 years

Eligibility:

1. Resident Indians (individuals, HUFs)

2. Capital gains from sale of:

    - Long-term assets (Immovable long term assets)

3. The investment must be made within 6 months from the date of transfer of the original asset.

Features:

1. Issued by:

    - National Highways Authority of India (NHAI)

    - Rural Electrification Corporation (REC)

    - Power Finance Corporation (PFC)

    - Indian Railways Finance Corporation (IRFC)

2. Investment limit:  Maximum ₹50 lakhs

3. Lock-in period: 5 years

4. Interest payment: Half-yearly/Annually

Tax Benefits:

1. Exemption from capital gains tax (u/s 54EC)

2. Interest income: Taxable