Invest in Section 54EC Bonds to save capital gains tax

There was a question on the forum on how you can save capital gains that arise from selling property, and Loney responded to that by the suggesting the Section 54EC Capital Gains exemption bonds.

I have not written about them earlier, so I thought I’d do a post on these bonds now. So, here is a post with some details on 54EC bonds.

Who should buy Section 54EC Bonds?

These bonds are specifically meant for people who have made some long term capital gains, and would like to save capital gain taxes on this amount.

Only long term capital gains are eligible for these bonds though, and short term gains are not covered under section 54EC.

54EC Bonds FAQ
54EC Bonds FAQ

What is the upper limit for investing in these bonds?

The maximum gains are capped at Rs. 50 lacs in a year, so you can invest in a maximum of Rs. 50 lacs worth of 54EC bonds in a year to avail of the tax benefit.

Please note that the section is not cut and dry, and there are conditions on how much money will be exempted based on whether the profit made is more than the cost itself, and I will try to detail out the sections in a later post, or if you have a link that does a good job of explaining this then please leave a comment and I’ll link to it.

Who is issuing 54EC bonds?

REC (Rural Electrification Corporation) is issuing these bonds, and from the current information present on their website I see that they will be issuing these bonds till March 31st 2011.

Here are their contact details:

(Application Form can be downloaded from the website :

a Our Registrar to the Issue :
RCMC Share Registry (P) Ltd.
B-106, Sector-2, NOIDA
U.P. -201301
Ph.: 0120-4015880-81
Fax: 0120-2444346
Website :

a For Investor Grievances
& Non-Priority  Sector Bonds
Email :

a For any assistance or clarification please contact:
Investor’s Relation Cell
Core-4, SCOPE Complex
7, Lodhi Road
New Delhi – 110003
Phone : 011-24361320, 011-2436 5161 extension 527
Tollfree No. : 1800-200-1333

NHAI is also issuing 54EC bonds, and their details can be found on this page.

What is the interest rate on 54EC bonds?

Currently, both REC and NHAI are offering 6% interest on their bonds.

What is the lock in period of these bonds?

The lock in period of these bonds is 3 years, so you can’t sell them before the 3 years.

Is the interest on these bonds taxable?

Yes, the interest from these bonds is fully taxable, and there is no exemption on that. TDS is however not charged on them.

Who can invest in these bonds?

Resident individuals, HUFs, partnerships, companies, banks, financial institutions, regional rural banks, co-operative banks, insurance companies, provident funds, super annuation funds, gratuity funds, mutual funds, FIIs, trusts authorized to invest bonds, NRIs investing out of NRO account on non repatriable basis can invest in these bonds.

So, everyone except your pomeranian can invest in these bonds.

Where can I buy these bonds?

A lot of bank branches sell these bonds, so you can ask at your local bank. Unfortunately, I don’t have a list of branches with me, so you will have to rely on other sources, or check with your local branch.

Do I need a demat account for them?

No, you don’t necessarily need a demat account for them because the bonds are issued in paper as well as demat form.

I’ve tried to cover whatever points I could think of about these bonds, but I’m sure there are several aspects that I missed, so feel free to ask any questions in the comments section, and of course any other observations are also welcome.


112 thoughts on “Invest in Section 54EC Bonds to save capital gains tax”

  1. My mother has a flat at her name which she bought at 1991 at Rs 240000. she is 72 years now. She wanted to sell it now at 3500000/-The property is at her name. being a senior citizen what will be her tax deduction .

  2. Dear Sir,

    My mother has sold one property on 27th Jan, 2016. She has applied for NHAI bond on 21st July, 2016 by payment through cheque. Please tell me whether the date of application or the cheque clearance date shall be reckoned as date of purchase. What shall be the last date of purchase to avail benefit of sec. 54EC in my mother’s case?

  3. Hello Shiv, experts on the forum,

    I bought NHAI 54EC bonds last year and received the interest on 2nd April 2016 for FY15-16.
    As announced, NHAI didnt deduct TDS and I want to pay the taxes on the interest earned.

    How can I do the same in ITR form in section TDS2? (as there is no row for NHAI there)
    If I add a new row, what do I fill in : “TAN number”, “Name of deductor”, “Tax deducted”, “Amount claimed this year”,

    Any help is much appreciated!

  4. Pls confirm in case we can cancel ya break the bond before 3 yrs… what is the procedure as its an emergency in my family.

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