Investment in REC and NHAI Bonds u/s 54EC now more Beneficial

People nowadays have become so much aware about the fact that while selling properties they become liable to pay huge tax liabilities. Therefore, to reduce the burden of paying huge taxes people plan to reap tax benefits as prescribed by the Ministry of Finance. The Income Tax department has prescribed certain benefits in several sections of Income Tax Act for the sellers of the properties. Sections 54, 54B, 54D, 54EC(REC and NHAI bonds), 54ED, 54F and 54G are helping the sellers of the properties in reducing their tax liability.
Section 54EC – Investment in Bonds:-
Among all these Section 54EC is a very popular way to reduce the burden of tax liability.
Gains arising from the transfer of any long term capital asset are exempt under section 54EC if the assessee has within a period of 6 months after the due date of such transfer invested the capital gain in long term specified bonds as notified by the Govt. for a minimum period of 3 years.
In case where the long term specified asset is transferred or converted into money at any time within a period of 3 years from the date of its acquisition, the amount of capital gain exempt u/s 54EC, shall be deemed to be long term capital gain of the previous year in which the long term specified asset is transferred or converted into money.
If the assessee even takes a loan or advance on the security of such long term specified asset, he shall be deemed to have converted such long term specified asset into money on the date on which such loan or advance is taken.
These specified bonds are usually issued by REC and NHAI and the interest rate offered is 6%.Tax on the assets (subject to a maximum limit of Rs. 50 Lac) within a period of 6 months from the date of such transfer.
Recent lucrative benefits given by these specified bonds:-
Moreover, now, there is an even bigger reason for investors to lap them up. The bonds of PFC, REC, Hudco and NHAI, all issued in the first quarter of 2012, have increased in value by 5-15 per cent as rate cut hopes drive up prices. The 15-year 8.3 per cent NHAI - N2 bond (face value of Rs 1,000 and interest paid annually), issued in January 2012, is quoting at Rs 1,170, a gain of 10.8 per cent in one year, while the 15-year 8.12 per cent REC bond has moved up from Rs 1,010 to Rs 1,175 in the same period. Though yields have fallen by 100-110 basis points (prices and yields move in opposite directions), experts are advising investors to stay invested and even buy some more as inflation slows and the interest rate environment becomes more benign.
You can apply for the Rural Electrification Corporation’s Sec. 54EC bonds in this link- http://recindia.nic.in/download_forms.html
You can apply for the NHAI bonds in this link- http://www.nhai.org/bonds1.html
Contents BYAlok Patnia

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