Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. These bonds are highly secure, sovereign in nature with a AAA rating. Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.
Investing in Bonds: Stability for Secure Financial Growth
54EC Bonds do not allow any tax exemptions on short term capital gains tax. 54EC Bonds involve tax exemptions on long-term capital gains for investors who have sold their properties. The investment should be made within six months from the date of sale. The investment for individual investors is capped at Fifty lakhs. For partnership businesses, each partner qualifies to invest Fifty lakhs. 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. The tax rate of capital gains arising from the sale of long-term capital assets is 20% if the individual fails to invest such capital gains in specified capital gains bonds.
Understanding Capital Bonds: A Comprehensive Guide to 54EC Bonds for Indian Investors
We tell you how to save on taxes on any long-term capital gain. A long-term capital gain is any revenue that you get from the sale of an asset. According to the Income Tax Act, you are liable to pay tax for such gains. However, you can reduce the liability of these taxes.Invest in section 54EC bonds, also commonly known as capital gain bonds, to avail tax deductions in the future. The bonds are issued as per the provisions of the section 54EC of the IT Act. 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 or Capital Gains Bonds is one such instrument to consider and know about, which will get you an exemption from the capital gains tax that you might have incurred on a long term asset provided certain conditions are met.
- You will need to declare capital gain from 54EC bonds under your return filing since no tax is deducted at the source.
- Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax.
- These bonds are highly secure, sovereign in nature with a AAA rating.
- You can buy these bonds online through the respective company’s website or contact a broker.
GST Case Law Compendium- October 24 Edition
But not many of us might be aware of an investment in a financial instrument which provides an exemption from capital gains tax (up to a cap of Rs.50 lakh). No, you can’t redeem the investment before the maturity of bonds i.e. before 5 years from the date of investment. If you redeem bonds before their maturity, the exemption granted under Section 54EC will not be granted and you will have to pay LTCG tax on the original capital gains amount. The assessee has invested the amount of capital gain (wholly or partly) in the long term specified assets.
BondsIndia is a brand name of Launchpad Fintech Private Limited, an e-business platform for Fixed Income securities that uses technology as a means to provide quality & real-time financial solutions to users. The bonds can be credited in their DEMAT account or can be purchased in physical form. Trusted by over 2 Cr+ clients, Angel One is one of India’s leading retail full-service broking houses. We offer a wide range of innovative services, including online trading and investing, advisory, margin trading facility, algorithmic trading, smart orders, etc.
These 54EC bonds make a good investment for long-term capital gains tax-saving in India. The interest rate may not compare with certain other investment options, but it often stands well with the managerial accounting definition leverage of tax exemption benefits. As always, you need to align your investment decisions in light of your financial goals and the capability and strategy of tax planning. This way, you make most of your investments in 54EC bonds. Investors can gain tax exemptions under section 54EC with capital gain bonds.