Long Term Capital Gain Deduction

LTCG Deduction for Investing in NHAI & RECL Bonds

Avail Long Term Capital Gain Deduction as per Section 54EC of Income Tax Act, India, to reduce your tax liability by investing in Redeemable NHAI & RECL Bonds.

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How to claim the LTCG Deductions?

Where the capital gain arises from the transfer of,

  • a long-term capital asset, and

  • at any time within a period of six months after the date of such transfer,

  • invested the whole or any part of capital gains in the long-term specified asset, and

if the cost of the long-term specified asset is more than your long term capital gains, the whole of such capital gain is not taxable.

If the cost of the long-term specified asset is less than your capital gains, then you can claim deduction to the extend of cost of the new assets.


Conditions to Claim the Deduction

  • Invest in bonds within six months from the date of transfer of your original capital asset.

  • You should not transfer or convert the bonds into money for a period of three years from the date of acquisition.

  • Don't take loan or advances on long-term specified asset (bonds) for a period of three years from the date of acquisition.

  • Invest in any one of the following long-term specified asset (bonds) listed below.


Long-term Specified Asset

Any bonds specifically notified under this section and

  • issued by National Highway Authority of India (NHAI).

  • issued by Rural Electrification Corporation Limited (RECL).

All the bonds should be redeemable after three years, only.


Long Term Capital Gain Deduction u/s 54EC

  • Long Term Capital Gain Deduction u/s 54EC, can be claimed by any assessee/tax payer.

  • You can claim this deduction for any Long Term Capital Asset you transferred.

  • Once the transfer is over, with in six months, invest in long-term specified assets mentioned above.

  • Don't redeem/transfer/convert/take loan against, the bonds for the period of three years.

  • The maximum amount that you can invest, on or after the 01.Apr.2007 in any long-term specified asset during any financial year is Rs.50,00,000 (fifty lakhs).

  • Once you avail the deduction u/s 54EC, you can't claim deduction u/s 80C for the same amount.

What happens if I redeem the long-term specified asset before three years?

If the long-term specified asset is transferred or converted, into money at any time within a period of three years from the date of its acquisition, then the amount exempt from Capital Gains will be chargeable to Income tax in the year in which you redeemed.

Even if you take any loan or advance on the security of such specified asset, it will be considered as deemed conversion on the date on which such loan or advance is taken. And you will be liable to pay capital gains tax.


Questions & Answers Related to 54EC

Question 1: Where can I get the bonds?

Answer 1: You can get the applications online at NHAI and RECL.


Question 2: Is there any restriction on number of applications?

Answer 2: There is no limit in the number of applications. However the total amount must not exceed Rs50 Lakhs during the Financial Year (i.e) From 01 Apr-2012 to 31 Mar-2013.


Question 3: Can I invest in both bonds?

Answer 3: Yes. You can invest in both the bonds. But the aggregate amount you invest in both the bonds must not exceed Rs50 Lakhs.


Question 4: Can I invest in the name of my minor child and claim the tax benefits?.

Answer 4:Not advisable. Better to have in your name.


Question 5:How can I claim the Long Term Capital Gain Deduction u/s 54EC? .

Answer 5:You should have complete LTCG Calculation with you. While filing the return of Income you should specify investment details in the relevant column.


Do you have any questions related to 54EC? Ask Us

Top of Long Term Capital Gain Deduction

Related Topics

54 »

54B »

54D »

54F »

54G »




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