54EC Capital Gains Bonds: A Comprehensive Guide
What is a 54EC Capital Gains Bond?
54EC Capital Gains Bonds are investment options under Section 54EC of the Income Tax Act, designed to help individuals save on capital gains tax. These bonds are issued by specific government-backed entities and offer tax exemptions on long-term capital gains when invested in them. The bonds have a fixed tenure and provide a safe, low-risk way to defer tax payments on capital gains.
Types of 54EC Capital Gains Bonds
- Government-Backed Bonds:
- Issued by entities like NABARD, REC, and PFC.
- Offers guaranteed returns as they are backed by the government.
- Tax exemptions available on long-term capital gains.
- Interest-Paying Bonds:
- These bonds offer fixed interest, paid annually or at maturity.
- Interest earned is taxable but provides a steady income stream.
- Non-Interest-Paying Bonds:
- These bonds do not pay regular interest.
- Instead, the returns are in the form of capital appreciation.
- Ideal for investors looking for tax-saving options with capital growth.
- Provides tax-saving opportunities while ensuring low risk.