54EC Bonds
Capital-gain bonds that shelter long-term gains from property under Section 54EC — invest within six months of the sale.
Overview
Sold a property and facing a long-term capital-gains bill? Section 54EC lets you invest the gain in government-backed capital-gain bonds (REC, PFC, IRFC) within six months of the sale and claim exemption on that amount. We handle issuer choice, the timing window and the paperwork.
At a glance
- Sec 54EC exemption
- Govt-backed issuers
- 5-year lock-in
Key benefits
Long-term capital-gains exemption under Section 54EC
Government-backed issuers — REC, PFC, IRFC
Five-year lock-in with a fixed annual coupon
We track the six-month deadline for you
Coupon
5.25% p.a.
Rating
AAA
Lock-in
5 years
Exemption cap
₹50 lakh
Indicative coupon as of 2026. Interest is paid annually and is taxable.
Our offerings
A shortlist we would put our own money into — not everything on the market.
REC — Rural Electrification Corporation
- Coupon
- 5.25%
- Rating
- AAA
- Tenure
- 5 years
- Interest
- Annual
PFC — Power Finance Corporation
- Coupon
- 5.25%
- Rating
- AAA
- Tenure
- 5 years
- Interest
- Annual
IRFC — Indian Railway Finance Corporation
- Coupon
- 5.25%
- Rating
- AAA
- Tenure
- 5 years
- Interest
- Annual
What to weigh before you invest
The six-month window is hard
The investment must be made within six months of the date you sold the property. Miss it and the exemption is gone — there is no appeal.
Five-year lock-in, no exit
The money cannot be redeemed for five years. The bonds are not tradable and cannot be pledged, so treat this as capital set aside.
Only long-term gains on property
The exemption applies to long-term capital gains on immovable property — land or buildings held at least 24 months. It does not cover equity gains.
Capped at ₹50 lakh
The maximum exemption is ₹50 lakh per financial year. Gains above that need a different shelter, which we plan for alongside.
Who 54EC Bonds suits
If you recognise yourself here, it is worth a conversation — a free review, with no obligation and nothing to sign.
- Anyone who has just sold land or a building at a long-term gain
- Sellers who want to shelter up to ₹50 lakh of gain from tax
- Investors comfortable locking capital away for five years
- Those who value a sovereign-backed AAA issuer over a higher coupon
Got questions? We have answers
What is a 54EC bond?
A capital-gain bond issued by a government-backed body such as REC, PFC or IRFC. Investing your long-term capital gain from a property sale into one — within six months of the sale — exempts that gain from tax under Section 54EC of the Income Tax Act.
What is the lock-in period?
Five years from the date of allotment. The bonds cannot be redeemed, traded or pledged during that time.
What is the rate of interest?
Currently 5.25% per annum, paid annually. The coupon is deliberately modest — the return here is the tax you save, not the interest you earn.
Is the interest tax-free?
No. The capital gain is exempt, but the annual interest is taxable at your slab rate. There is, however, no TDS deducted on it.
How much can I invest?
Up to ₹50 lakh in a financial year, which is also the cap on the exemption. The minimum is typically ₹10,000.
Which issuers can I choose from?
The government-backed bodies authorised to issue them: REC (Rural Electrification Corporation), PFC (Power Finance Corporation), IRFC (Indian Railway Finance Corporation) and NHAI. All are AAA-rated and all currently offer the same coupon, so the choice rarely turns on returns.
What if my capital gain is more than ₹50 lakh?
54EC will shelter only ₹50 lakh of it. The remainder needs a different route — reinvesting in residential property under Section 54 or 54F, or simply paying the tax. We map the options against your actual gain before the six-month window closes.
Can I invest the entire sale proceeds?
No — only the capital gain, not the full sale value. That is the crucial difference from Section 54F. Work out the gain first; putting in more than that buys you no additional exemption.
What if I sell the bonds or take a loan against them?
You cannot. They are non-transferable and cannot be pledged. If you were somehow to liquidate them within five years, the exemption you claimed would be reversed and taxed as long-term capital gain in that year.
Does the six-month window run from the sale or from receiving the money?
From the date of transfer of the property, not the date the funds reach you. That catches people out when payment is staggered — the clock has already started.
Can NRIs invest in 54EC bonds?
Yes. An NRI who sells property in India and makes a long-term capital gain can claim the same exemption, investing through an NRO account. The TDS mechanics on the sale itself are more involved, which we help handle.
What happens when the five years are up?
The bonds are redeemed automatically and the principal is credited to your registered bank account. The redemption itself is not a taxable event — the gain you sheltered stays sheltered.
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