Can OCI card holder invest in REC 54EC bonds to decrease LTCG taxes (2024)

FAQs

Can OCI card holder invest in REC 54EC bonds to decrease LTCG taxes? ›

The only limitation is an assessee can invest and amount of 50L in a financial year. You can very much invest up to 50L in 2023 and claim exemption. Taxpayers or assessees who acquire capital gains can avail of tax deductions under Section 54EC of the Income Tax Act 1961.

NRIs can claim deductions by investing in Capital Gain Bonds issued by REC and NHAI under Section 54 EC. These bonds have a 3 year lock-in period.

Yes. NRIs can buy capital gains bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC), etc. to save tax on their long-term capital gains from the sale of their property in India.

The exemption under Section 54EC can be claimed by any taxpayer, including individuals, Hindu Undivided Families (HUFs), companies, LLPs, firms, and others. The asset being sold should be a Long Term Capital Asset, which includes land or building or both.

Exemption under Section 54EC of the Income Tax Act is available on Capital Gains on the sale of land or building or both being LTCA and purchase of bonds of NHAI or REC. The amount of Exemption under Section 54EC will be lower of: The Cost of NHAI/REC Bonds, The Capital Gains on the sale of land or building.

Yes, NRIs can invest in RBI bonds in India. To invest in bonds as an NRI, one must utilize the “NRI Window” which gets enabled while the issuing of the bonds by the issuer. The rules and regulations for investing are the same for NRIs and OCIs (Overseas Citizen of India).

54EC bonds, or capital gains bonds, are one of the best way to save long-term capital gain tax. 54EC bonds are specifically meant for investors earning long-term capital gains and would like tax exemption on these gains. Tax deduction is available under section 54EC of the Income Tax Act.

Let's say even after considering indexation, you make a capital gain of Rs50 lakh. Now, if you invest it in 54EC bonds, it will fetch you a return of 5.25% (which will be taxable at your slab rate) and also lock your money for 5 years. After 5 years your investment would be worth about Rs64. 58 lakh.

Interest: The section 54EC bonds offer an interest rate of 5.75 percent. Interest is earned annually. Interest earned on the bonds is taxable. Safe: The capital gain bonds are AAA rated and are secure.

What is the interest rate of 54EC bonds in 2023? ›

Section 54EC of the Income tax Act notifies certain bonds in which the capital gains can be invested to claim LTCG tax exemption. These bonds offer interest rate, which is 5.25 per cent from April 1, 2023 which is 25 basis points higher than FY23.

The maximum limit for investing in 54EC bonds is Rs. 50,00,000. The eligible bonds under Section 54EC are REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd), and IRFC (Indian Railways Finance Corporation Limited).

Section 54EC of the ITA mentions that if an investor earns profits from selling a long-term capital asset – be it immovable property, and invests it in long-term specified assets within the 6 months from the date of sale, the capital gains qualify for tax exemption.

The lock-in period for 54EC bonds is 5 years. This means that you cannot sell the bonds before the expiry of the lock-in period. How much can I invest in 54EC bonds?

Capital gain bonds have a lock-in period of five years.

Therefore, the expatriate may purchase millions of dollars worth of bonds in order to generate some stable income. Since the bond income is interest income and it is US sourced — it is not taxable to the nonresident alien owner of the bond.

The interest earned on these bonds is fully taxable, but the amount invested in these bonds is eligible for deduction under Section 54EC of the Income Tax Act, 1961. This means that individuals can save on tax by investing in these bonds, up to a maximum of Rs. 50 lakhs per financial year.

At ICICIdirect.com, choose from a varied Bond option available to suit your investment needs. A range of Bonds are available to choose from RBI Bonds, Corporate Bonds, Sovereign Gold Bonds and Capital Gains Bonds.