Bonds

 

Capital Gains Bonds are instruments offering you tax exemption for transferring gains of long term capital assets.

 

In accordance with section 54 EC of the Income Tax Act, 1961, all categories of tax payers would be eligible to save tax in respect of long term capital gains by making investments in certain Bonds prescribed.

These bonds are classified as 'long-term specified asset' and are issued by REC, NHAI, PFC and IRFC.

These bonds are specifically for investors who have made some long term capital gains, and would like to save capital gain taxes on this amount.

Only long term capital gains are eligible for these bonds though, and short term gains are not covered under section 54EC.

The interest from these bonds is fully taxable

 

The entire capital gain realized is invested within 6 Months of the date of transfer in eligible bonds

Such investment is held for 5 Years

To avail of capital gain exemption, the bonds so acquired cannot be transferred or converted into money or any loan or advance can be on security of such bond with 3 years from date of acquisition else, the benefit would be withdrawn.

If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax.

 

 

The Government of India launched the Floating Rate Savings Bonds, 2020 (Taxable) scheme on July 01, 2020 to enable Resident Indians/HUF to invest in a taxable bond, without any monetary ceiling. 

A Bond is a debt instrument issued for the purpose of raising capital by borrowing.

Bonds can be issued by companies, financial institutions or the government. Bonds issued by the government or RBI are considered the safest bonds.

Bonds can be divided into different categories based on tax status, credit rating, issuer type and maturity.

Bonds are suitable for regular income purposes.

Specific tax saving or tax free bonds are available that offer certain tax benefits to the investor.