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Sold Your Property?

Save Tax on Capital Gains

Capital Gain Bonds are an ideal choice if you are looking for a safe and tax-efficient way to preserve your capital gains instead of paying a hefty tax.
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What are Capital Gain Bonds?

Capital Gain Bonds, also known as 54EC Bonds, are a government-backed investment designed to help individuals save on long-term capital gains tax. If you have sold a property and made a profit, investing in these bonds allows you to eliminate tax liability up to Rs 50 lakh, provided the investment is made within six months of the sale/transfer.

Issued by Navaratna institutions (PSUs), these bonds offer a fixed interest rate and come with a five-year lock-in period, making them a secure and tax-efficient investment choice.

Let us take an example of an investor who sold the property 3 Years after buying the same

Category Amount
Purchase price of property ₹ 46,00,000
Selling price of property ₹ 1,00,00,000
Long Term Capital Gain on property ₹ 54,00,000
Investment in 54EC bonds ₹ 50,00,000
Tax saving (12.5%) ₹ 6,75,000
Interest earned @5.25% p.a. for 5 Years (taxable) ₹ 13,12,500

Disclaimer: LTCG Tax on property held over 24 months is 12.5% or 20% with indexation

54EC Bond Offerings

Issuer Name
Rating Tenure Investment Limit Interest (p.a.)
Rural Electrification Corporation
AAA 5 years Upto 50 Lakhs 5.25% Invest
Power Finance Corporation
AAA 5 years Upto 50 Lakhs 5.25% Invest
Indian Railways Finance Corporation
AAA 5 years Upto 50 Lakhs 5.25% Invest
Housing and Urban Development Corporation Limited
AAA 5 years Upto 50 Lakhs 5.25% Invest

Benefits of Capital Gain Bonds

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Tax Savings

Avail tax exemption under Section 54EC by investing up to ₹50 lakh within six months of the sale / transfer of property.

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Government-Backed

Issued by reputable public sector entities, ensuring safety.

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Fixed Returns

Earn steady interest (subject to taxation)

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Hassle-Free Investment

No market dependency; just invest and hold in DEMAT.

How Capital Gain Bonds Work

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Sell a Capital Asset 

If you make long-term capital gains from the sale / transfer of property you can invest in these bonds.

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Invest Within 6 Months

You must invest the capital gains amount in 54EC Bonds within six months from the date of sale.

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Lock-in Period of 5 Years

The invested amount is locked in for 5 years, and premature redemption is not allowed.

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Earn Fixed Interest

The bonds offer an annual interest rate, which is taxable as per your income slab.

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Redeem After 5 Years

Once the tenure is over, you receive the principle amount back.

Who Should Invest in Capital Gain Bonds?

Real estate invetsors

If you have sold a residential or commercial property and want to reduce the amount of capital gains tax paid, investing in 54EC Bonds can help.

Risk-Averse Investors 

Since these bonds are backed by Navratna institutions (PSUs) like PFC, IRFC and REC, they are a secure option for investors who prioritize capital safety and fixed returns.

Frequently Asked Questions

What are 54EC Capital Gain Bonds?

54EC Capital Gain Bonds are a type of financial instrument issued by specified institutions in India. These bonds provide a tax-saving option for those who have incurred long-term capital gains from the sale / transfer of long-term capital assets such as land, building or both. Any capital gains invested in these bonds would be exempted from tax u/s 54EC.

Yes. Individuals must invest their capital gains within 6 months from the date of asset sale / transfer in order to avail tax exemption.

These bonds are typically issued by government-approved entities, such as Indian Railways Finance Corporation (IRFC), Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

The primary purpose is to defer the tax liability on long-term capital gains by investing the proceeds from the sale of capital assets (land, building or both) in these bonds. This allows taxpayers to save on capital gains tax.

Yes. The lock-in period for these bonds is 5 years from the date of purchase. You cannot redeem or sell these bonds before the completion of this period.

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