Latest news with #Section54EC
Time of India
19 hours ago
- Business
- Time of India
How can you invest LTCG in Section 54EC bonds?
When an investor sells a residential property and makes long-term capital gains ( LTCG ), the tax liability can be significant. However, the Income Tax Act provides some relief, allowing taxpayers to save on capital gain tax by investing the profit earned in capital gain bonds . These bonds are referred to as Section 54EC bonds . Tax-saving options Capital gain bonds are tax-saving instruments that are issued by entities backed by the government, including REC , National Highways Authority of India (NHAI), Power Finance Corporation (PFC), and Indian Railway Finance Corporation (IRFC). Eligibility To be eligible, the capital gains should arise from the sale of a long-term asset, such as land or a building. The investment must be made within six months of the date of transfer of the property. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like An engineer reveals: 1 simple trick to get all TV channels Techno Mag Learn More Undo Investment limit The maximum investment allowed in capital gain bonds is Rs 50 lakh per financial year. The bonds come with a lock-in period of five years and premature redemption is not permitted. The interest rate offered typically ranges between 5% and 5.25% per annum. How to invest Investors can purchase these bonds either online through the websites of issuing institutions or offline via designated bank branches. The required documents include PAN card, address proof, and details of the property sold. The investment must be made from the capital gains portion only, not the total sale proceeds. Live Events Points to note • Capital gains not invested within the stipulated six-month window will be taxable at applicable rate. • Interest earned on Section 54EC bonds is not tax-free and must be disclosed in the annual tax return. Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta
Time of India
30-04-2025
- Business
- Time of India
My wife will get Rs 3 crore after selling her ancestral property. What is the best way to save income tax and achieve future goals?
Tired of too many ads? Remove Ads (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of .) As the property is ancestral, the capital gain from its sale will attract 20% LTCG tax with indexation or 12.5% without indexation. Calculating the acquisition cost may involve complexities. Section 54 of the IT Act offers avenues to save or defer LTCG tax, depending on the type of property. Consult a tax adviser to determine the LTCG and explore suitable tax-saving instruments. Instead of investing in capital gains bonds under Section 54EC, which have a five-year lock-in period and low returns of 5.25% per annum, it may be better to pay tax and allocate the proceeds to financial goals and investments. Maintain six months' expenses in bank FDs yielding over 7.5% for liquidity and safety. Next, purchase health insurance of at least Rs 1 crore, with a base health cover of Rs 5-10 lakh and top-up cover of Rs 90-95 lakh for relatively low premiums, to deal with unforeseen medical emergencies. You may purchase term insurance plan(s) covering 20 times your family's annual expenses for ensuring financial security of your dependants in case of the unfortunate event of your untimely demise. Allocate the remaining proceeds in a 60:35:5 ratio across flexi-cap, multi-asset, and gold funds through 12-18 month SIPs. You can consider the direct plans of Parag Parikh Flexi Cap Fund and/or HDFC Flexi Cap Fund for the flexicap category; Nippon Multi Asset Fund and/or ICICI Prudential Multi Asset Fund for the multi-asset category and SBI Gold Fund and Aditya Birla Sun Life Gold Fund for exposure to you are not planning to save on capital gains tax from this transaction, you can simply invest the proceeds. However, if you intend to claim tax exemption under Section 54 of the Income Tax Act, the house purchase must be completed within two years of the sale. Alternatively, you can invest in 54EC bonds, which have a lock-in period of five years. If you are comfortable paying the tax now and your goal is to let the investment grow until 2030, a balanced 50:50 mix of equity and debt may be suitable. For equity, consider index funds based on the Nifty 50 or Nifty Midcap 150, or active funds like Parag Parikh Flexicap. For debt, look at short-, medium-term, and floating rate debt funds such as Aditya Birla Sun Life Floating Rate Fund, ICICI Prudential Short Term Fund, and HDFC Corporate Bond Fund—under the growth our expertsHave a question for the experts? etwealth@
