Capital gain bonds of NHAI & REC: Intro, Conditions, Features, Interest
Capital gain bonds of NHAI & REC: Capital Gain Bonds is the best way to save long term capital gain from the any property type. The exemption for capital gain bonds is available u/s 54EC.. What is a capital asset ?, Long term Capital Gain, Taxability of Interest, Capital Gain Bonds Of NHAI & REC etc.
Capital gain bonds of NHAI & REC
What is a capital gain ?
If a capital asset is sold, the difference between the final sale price and the purchase price will become a capital gain or a capital loss. If you sell the asset for more than you paid for it, you will realize a capital gain.But if you sell it for a price which is less than the actually purchased price then it is capital loss. Some common capital assets include home, jewelry ,land ,any immovable property ,shares etc.,
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Long term capital gain :
Long-term capital gain is the amount of profit that a person makes on sale of any capital asset which he has held for a period of more than three years.
This long term capital gain tax can be saved if this amount is invested in Bonds specified under Section 54EC of income tax act within 6 months from the date of sale of the asset.
Condition related to period of holding?
The asset which has been sold should be held for a period of more than 3 years. Otherwise it will be classified as a short term capital asset and not covered under this section , thus it is taxable.
National Highway Authority of India (NHAI) and the Rural Electrification Corporation of India (REC) issue capital gain bonds which are covered under section 54EC of income tax act 1961.
Provision of law in simple words :
Under Section 54 EC of Income Tax, 1961 an investor need not pay any tax on any long-term capital gains arising on sale of any asset, if the amounts of capital gains are invested in certain specified bonds. Rural Electrification Corporation Limited (REC) & National Highways Authority of India (NHAI) are permitted to issue capital gains bonds under Section 54 EC.
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Features of these bonds :
1.These bonds have been rated as “AAA” which means Stable by Credit Rating and Information Services of India (CRISIL).
2. No TDS is deducted on the amount of interest earned on these bonds.
3.Coupon rate of interest is 6.00% which is payable annually.
4. Non negotiable : These Capital Gain Bonds are non transferable, non negotiable and cannot be offered as a security for any advance or loan.
5.Lock in period of 3 years : These Bonds are issued for a period of 3 years and cannot be sold before 3 years as required by Section 54EC.
6.Bonds can be held in Demat or physical form as desired by the investor.
7. a) Face Value Rs. 10000/- per Bond
b)Issue price Rs.10000/- per Bond
8.Minimum number of bonds to be purchased is one bond of Rs. 10,000/-
9. Maximum number of bonds can be purchased are 500 of Rs.10,000/- each (Rs.50,00,000).The maximum capital gains exemption that can be claimed by a taxpayer under Section 54EC is also limited to Rs. 50 Lakhs. This limit of Rs. 50 Lakhs is the aggregate maximum exemption ,irrespective of the financial year.
10.Maturity : At par, 3 years from Deemed Date of Allotment.
11.Facility of Payment of Interest and Redemption through NECS.
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Taxability of interest :
The amount of interest earned on these bonds is not tax free and tax on interest would be liable to be paid as per the income tax slabs of the taxpayer.
As per the precious information available in the website of NHAI details regarding closure of issue of these bonds :
Closure of Issue:
The issue is open on-Tap Basis and will close on March 31, 2016 at the close of the banking hours or on achieving of ceiling limit of Rs.4,000 Crore without any further notice or at a date as may be decided by NHAI at its absolute discretion.