54EC Capital Gain Property Tax Savings Bonds, also known as Section 54EC Bonds, are a specific type of bond issued by the National Highways Authority of India (NHAI) and the Rural Electrification Corporation (REC) under the provisions of Section 54EC of the Income Tax Act, 1961 in India.

These bonds are designed to provide tax relief to individuals or Hindu Undivided Families (HUFs) who have earned long-term capital gains from the sale of specified assets, such as real estate or land. By investing the capital gains in these bonds, investors can claim exemptions from paying taxes on the capital gains.

Key features of 54EC Bonds:

  1. Purpose: The primary purpose of these bonds is to provide a tax-saving avenue for individuals or HUFs who have generated long-term capital gains from the sale of assets. It allows them to reinvest the gains in these bonds within a specified time frame to avail of tax exemptions.
  2. Lock-in Period: The investment in 54EC Bonds comes with a lock-in period of three years. During this period, the investor cannot redeem or sell the bonds.
  3. Interest Rate: The interest rate on these bonds is determined by the issuing authorities (NHAI and REC) and is usually fixed for the entire tenure of the bond. The interest is taxable as per the individuals tax slab.
  4. Maximum Investment Limit: The maximum investment limit in these bonds is set by the government and subject to change from time to time. As of my knowledge cutoff in September 2021, the maximum investment allowed is ₹50 lakh per financial year.