Hyderabad - For those who have sold a capital asset this year and have not yet reinvested the profit earned from it, consider investing in NHAI and REC bonds.
The government charges 20% tax on long term capital gains arising from profit made through transfer of capital asset such as land, shares, bond, building, mutual funds, debentures held for more than 24 months.
“To avail the tax exemptions on long term capital gains tax on sale of residential house, investment must be made in residential property, anywhere in India, NHAI/RECL or notified bonds, units of specified funds or equity shares of eligible start ups engaged in eligible businesses,” said Preeti Mahatme, CA and tax consultant of PP Mahatme and Co.
The government allows an investor to save long term capital gains tax by investing in certain specified bonds floated by the National Highways Authority of India (NHAI) and the Rural Electrification Corporation Limited (REC) under Section 54 EC of the Income Tax Act, 1961.
These bonds have a lock-in period of 3 years and are non-transferable. The minimum investment in these bonds is Rs 10,000 and can go up to a maximum limit of Rs 50 lakhs. They are readily available in the demat and physical form and is automatically redeemed after expiry of 3 years.
“As these are tax saving bonds, the interest rate paid by the government is only 5.25% per annum. However, they are good option of investment as you can save 20% tax on the sale of asset. It is also easily available,” said Rahul Joshi, CA and director of Filingmantra.