CAPITAL GAIN 54 EC BONDS OFFER 10.56% EFFECTIVE RETURN TAKING INTO CONSIDERATION THE INCOME TAX SAVINGS. INFORMATIVE ANALYSIS. 📈
When there is an income of long term Capital gains, investors always are in a dilemma whether to invest in Capital Gain Bonds under section 54EC or to pay tax and invest elsewhere. Following is an informative analysis in this regard.
▶️ Any individual is liable to pay tax on *capital gains arising from sale of any assets* as per the Income Tax Law.
▶️ Any capital gains arising on sale of any immovable property held for *more than two years* would qualify as *long term capital gains*.
▶️ Under *section 54EC* of the Income Tax Act, the gains if invested in notified bonds *within a period of 6 months* of sale would qualify for *exemption from capital gains tax. *
▶️ The exemption on such notified bonds of the *National Highways Authority of India (NHAI)* and *Rural Electrification Corporation (REC)* is available up to *INR 50 lakhs. *
▶️ The bonds pay an *interest of 5%p.a.* which is taxable are for a term of *five years. *
▶️ Any individual investing in such bonds *effectively earns 10.56%p.a. CAGR* (Compounded Annual Growth Rate) across a *tenure of 5 years* considering the capital gain tax saving and interest from such investment. The working for the same is shared below.
▶️ *Hence, an investor should compare the return from other investment avenues with the above rate while analyzing to choose the investment option.*
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