Sale of a Long-Term Capital Asset results in Long Term Capital Gains tax (LTCG) in the hands of the seller. Long-term capital gains (LTCG) are taxable under the Income Tax Act. However, you can get exemption on LTCG tax under Sections 54, 54F and 54EC. While the Sections 54 and 54F pertain to purchasing a house with the capital gains made, Section 54EC allows you to claim exemption from LTCG tax on purchase of notified government bonds.
Section 54EC states that if the profit made on sale of a long-term capital asset – whether an immovable property or shares and stocks – is invested by the taxpayer in ‘long-term specified assets’ within 6 months of the sale, then the capital gains are exempt from taxation. The ‘long-term specified asset’ currently eligible are Bonds (popularly known as 54EC Bonds) issued by the following entities:
At Richfield Fintech we can help you save taxes by sourcing these slightly inaccessible bonds. Connect with us for more details.