Investment in Bonds under Section 54EC
Meru Accounting is leading accounting firm in India and main player for outsourcing work in india. Here we are explaining Investment in Bonds under Section 54EC
- What is section 54EC
- What is the requirement of investment
- What you can invest
- What is time frame of investment
- What to do if you want to get more tax benefit.
What is Section 54EC?
If you want to save on your tax along with investment benefits, then you should avail benefits given under section 54EC of the Income-tax Act 1961. In 2017’s budget, the Finance Minister Arun Jaitley has increased the benefits given under section 54EC. This section lets the taxpayers save on tax on any capital benefit or profit accrued through the transfer of capital assets.
Although there are certain requirements to be eligible for the tax benefit, which is as follows.
- The asset which is transferred by assesses should be a long-term capital asset and it should result in long-term capital gains or profit.
- The transfer of such long-term capital asset should have been done post 1st April 2000.
- The capital gain or profit received by assesses from the transfer of such long-term asset must be invested in the long-term specified asset only.
- As per the section 54EC(1), any investment that assesses has made in a financial year, must not be more than Rs 50 lakhs
Where to Invest for the Deduction?
For availing benefits, you can invest in different bonds issued by the authorized institutions which are as follow.
- Bonds issued by the National Bank of Agriculture and Rural Development (NABARD)
- Bonds issued by the Small Industries Development Bank of India (SIDBI)
- Bonds issued by the National Highways Authority of India (NHAI)
- Bonds issued by the National Housing Bank
- Bonds issued by the Rural Electrification Corporation Ltd (REC)
All of them can be redeemed after completion of three years.
What You Can Invest?
There can be two types of investments.
- Full Investment: After fulfilling all the conditions, if the assesses deducts the full amount of the capital gains or profits provided the complete amount accrued by him/her is invested in the specified long-term investment is called full investment.
- Partial Investment: After fulfilling all the conditions, if the assesses deduct the only a partial amount of capital gains or profits in specified long-term asset is partial investment.
How to Get More Benefits?
There are certain other deductions that you can avail like bonds acquired jointly by two individuals, depreciable asset, installments, closure of subscription, etc.