CAPITAL GAIN 54 EC BONDS OFFER 10.56% EFFECTIVE RETURN TAKING INTO CONSIDERATION THE INCOME TAX SAVINGS. INFORMATIVE ANALYSIS. ย ๐
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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.
โถ๏ธ Any individual is liable to pay tax on *capital gains arising from sale of any assets* as per the Income Tax Law.
โถ๏ธ Any capital gains arising on sale of any immovable property held for *more than two years* would qualify as *long term capital gains*.
โถ๏ธ 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. *
โถ๏ธ 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. *
โถ๏ธ The bonds pay an *interest of 5%p.a.* which is taxable are for a term of *five years. *
โถ๏ธ 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.
โถ๏ธ *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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