Under Section 54 EC of Income Tax, 1961 an investor need not pay any tax on any long-term capital gains arising on sale of any asset, if the amounts of capital gains are invested in certain specified bonds. Rural Electrification Corporation Limited (REC) & National Highways Authority of India (NHAI) are permitted to issue capital gains bonds under Section 54 EC.

Some key features of Section 54 EC bonds are:

• AAA rated


• Interest is taxable although no TDS is deducted


• Lock-in of 3 years and non- transferable


• Minimum investment-1 Bond amounting to Rs. 10,000/- and maximum investment-500 Bonds amounting to Rs. 50 lakhs in a financial year


• Rate of Interest 6.00% p.a. payable annually


• Bonds can be held in Demat /Physical Form


• Facility of Payment of Interest and Redemption through NECS


• The Bonds will automatically redeem after expiry of three years