Capital Gains
Bonds (54EC)
Sold a property? You have six months to decide what happens to the tax.
Invest your long-term capital gain from the sale of land or a building into notified Capital Gains Bonds, and that gain is exempt from tax. PSU-issued. Five-year lock-in. One ₹50 lakh ceiling.
A note on the name
These are still known everywhere as 54EC bonds that was the section under the Income-tax Act, 1961.
Under the Income-tax Act, 2025, in force from 1 April 2026, the same provision is now Section 85. The section number changed; the rules did not. Issuer forms, CA notes and search results still say “54EC”, so both names refer to the same thing.
The instrument
What they are
When you sell a long-term property, the gain is taxable. The law offers an alternative: put that gain into bonds issued by specified public sector entities, hold them for five years, and the gain is not charged to tax.
Notified issuers include REC, PFC, IRFC and HUDCO. These are government-owned entities, and the bonds carry the highest domestic credit ratings.
The purpose is tax exemption. The coupon is fixed, modest, and set by the issuer you are buying a tax outcome with a return attached, not the other way round.
Eligibility
Who this is for
You sold land, a building, or both this is the only category of asset that counts
The property was held more than 24 months, making the gain long-term
You invest within six months of the date of transfer
You are any assessee individual, HUF, firm, LLP or company
Not eligible: gains from shares, equity mutual funds, gold, unlisted securities or other bonds. Only immovable property.
Five steps
How it works
Compute the gain
Not the sale value the long-term capital gain. Your tax advisor arrives at this figure.
Note the deadline
Six months from the date of transfer. Not from registration, not from possession, not from receipt of money. Count carefully.
Decide the amount
Invest up to the gain, subject to the ₹50 lakh ceiling. Invest less than the gain, and the balance stays taxable.
Apply
Choose an issuer and tranche, complete KYC, and remit by NEFT/RTGS from the first holder’s own bank account.
Hold for five years
Interest is paid annually. Principal returns at maturity.
We handle steps 4 and 5 issuer selection, application, payment coordination, allotment tracking and follow-up on interest credits so the deadline is not lost to paperwork.
Key terms
The rules at a glance
| Eligible gain | Long-term capital gain on land and/or building |
| Investment window | 6 months from date of transfer |
| Maximum investment | ₹50 lakh per assessee, in aggregate across the financial year of sale and the following financial year |
| Lock-in | 5 years |
| Interest | Paid annually, fully taxable at your slab rate as income from other sources |
| TDS | Not deducted for resident investors — the interest is still taxable and must be declared |
| Transferability | None. Cannot be sold, transferred, pledged or used as loan security during lock-in |
| Form | Demat or physical, depending on the issuer |
| Issuers | REC, PFC, IRFC, HUDCO |
Clear-eyed decisions
Read this before you invest
We would rather you go in with clear eyes.
01
The return is not the point
The coupon is fixed at the rate prevailing when you invest and typically sits below a bank fixed deposit. If rates rise during your five years, you do not participate.
02
The interest is taxed
The gain is exempt. The interest is not it is added to your income at slab rate every year.
03
The money is locked
Five years, no exit, no loan against it. Do not commit funds you may need.
04
Breaking the lock-in reverses the benefit
If you transfer, convert or borrow against the bonds within five years, the exempted gain becomes taxable in that year.
05
Tranches are not always open
Issuers open and close series. Waiting until month five is how deadlines get missed.
54EC bonds are one route. Section 54 (reinvesting in a residential house) is another, and for some sellers a better one. If your gain exceeds ₹50 lakh, you will need to look at a combination or accept tax on the balance. Discuss the choice with your tax advisor before you commit.
Our role
Why route it through AK Investments
Registered and regulated
BSE & NSE Registered. AMFI-registered, SEBI-NISM certified.
CA-led
the firm is founded and run by Chartered Accountants. We understand the computation your CA is working with.
Deadline discipline
we track your six-month window and flag it well before it closes.
End-to-end handling
issuer comparison, application, payment, allotment and annual interest follow-up.
Beyond the exemption
once the tax question is settled, we can look at what the annual coupon should be doing. Our Double Advantage Strategy routes bond interest into an SEP (Systematic Equity Plan), so the fixed income is not simply sitting idle.
FAQs
Is it 54EC or Section 85?
Both. Section 54EC of the Income-tax Act, 1961 became Section 85 of the Income-tax Act, 2025, effective 1 April 2026. Same exemption, same conditions, new section number.
I sold shares at a large profit. Can I use these bonds?
No. Only gains from land and/or building qualify.
Can I invest more than ₹50 lakh?
No. ₹50 lakh is the aggregate ceiling per assessee, and it spans the financial year of sale and the next one together you cannot double it by splitting across two years. Any gain above that is taxable unless another exemption applies.
The property was jointly owned. How does the limit work?
Each co-owner is separately eligible in respect of their own share of the gain, and each has their own ceiling. The bonds must be applied for by the person whose gain it is. Confirm the position for your specific case with your tax advisor.
What if I miss the six-month deadline?
The exemption is lost and the entire gain is taxable. There is no extension. This is the single most common reason sellers lose the benefit.
Is the interest tax-free?
No. The capital gain is exempt; the interest is fully taxable at your slab rate each year. No TDS is deducted for resident investors, so it is on you to declare it.
Can I break the lock-in in an emergency?
No. The bonds cannot be sold, transferred or pledged for five years. If you do any of these, the exempted gain becomes taxable in the year you do it.
How soon do I get the bonds?
Allotment usually takes a few weeks after your payment clears. The exemption is based on the date of investment, not the date of allotment.
Do I need a demat account?
Depends on the issuer most offer both demat and physical options. We will tell you what the current tranche requires.
Six months goes faster than you think.
Tell us the date of transfer and the gain figure. We will tell you the options open right now.
Call / WhatsApp: +91 77150 93772
Email: atulkela@caakinvestments.com
AK Investments, Goregaon, Mumbai
BSE & NSE Registered
DISCLAIMER
AK Investments distributes Capital Gains Bonds and does not provide tax advice or tax filing services. The information on this page is general in nature, reflects the position as understood at the time of writing, and is not a substitute for advice on your specific circumstances. Tax law and issuer terms are subject to change. Please consult your tax advisor before investing. Investments in bonds are subject to issuer and market risk; read the offer document carefully.