Meaning
Capital Gain Bonds, known by Section 54EC, offer investors a strategic way to manage their tax obligations on specific gains.
Definition
These financial instruments enable taxpayers to claim exemption from long-term capital gains tax under Section 54EC of the Income Tax Act, 1961.
How They Work
If you have long-term capital gains from selling assets, investing these gains into 54EC bonds within six months helps avoid tax. These bonds come with a mandatory lock-in period, usually five years.
Benefits
The main benefit is significant tax exemption on long-term capital gains. They also provide a secure investment with fixed interest rates.
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