IRFC Capital Gains Bonds for Tax Exemption under Section 54EC

IRFC Capital gains bonds allow individuals to apply for exemption from income tax applicable on capital gains made from sale of a property. Also known as 54EC bonds, these bonds are issued by government backed infrastructure companies including Rural Electrification Corporation (REC), Indian Railways Finance Corporation, Power Finance Corporation and National Highway Authority of India. In this piece, you will learn different aspects of IRFC capital gains bonds, including features & benefits, steps to buy them, etc.

IRFC Capital Gains Bonds for Tax Exemption under Section 54EC

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What are IRFC Capital Gains Bonds?

Founded in 1986, Indian Railway Finance Corporation (IRFC) is a Government of India Enterprise responsible for financing the Indian railways by raising funds from domestic and international capital markets. IRFC capital gains bonds are AAA-rated bonds by CRISIL, ICRA and CARE, which makes them a safe investment. 

You can buy IRFC capital gains bonds to get tax exemption on long-term capital gains made within six months by selling an asset like a residential or commercial property. For example, NRIs can claim tax exemptions under section 54EC of ITA on long-term capital gains made out of sale property in India.

Features of IRFC Capital Gains Bonds

Here are the key features of Indian Railway Finance Corporation Limited capital gains bonds:

ParticularsFeatures of IRFC 54EC Bonds
Interest rate5.25%
Face value/ minimum investmentRs. 10,000 per bond; Minimum investment Rs. 20,000
Maximum investment500 bonds of Rs. 10,000/ per bond i.e. Rs. 50 lakh in a financial year
Credit ratingAAA by CRISIL, ICRA and CARE
Issue open/ close dates01.04.2023 / 31.03.2024
Lock-in period5 years from the date of allotment
Tax/ TDS– No TDS- Interest is taxable; principal amount on maturity is tax free
Cheque / Draft to be drawn in the name ofIRFC CAPITAL GAIN BOND
Mode of holdingDemat or physical

Note: Interest rate is subject to periodic changes and depends on the internal policy of IRFC.

Benefits of IRFC 54EC Bonds

Listed below are the benefit of IRFC capital gains bonds:

  • You can avail of tax deduction on long-term capital gains from sale of property within 6 months, under section 54EC of the Income Tax Act.
  • IRFC 54EC bonds offer 5.25% yearly interest on investment. 
  • IRFC bonds are AAA-rated bonds by CRISIL, ICRA, and CARE.
  • Interest earned is tax but there is no TDS.

Can NRIs buy IRFC 54EC Bonds?

Yes. NRIs can buy capital gains bonds issued by Indian Railway Finance Corporation to save tax on their long-term capital gains from the sale of their property in India. As per section 54EC of I.T., any investor (individuals, NRI, HUFs, partnership firms, companies etc.) can avail exemption concerning long-term capital gains (arising from the sale of a long-term capital asset other than equity shares and securities), if the capital gain is used to buy 54EC bonds. The investment should be made within a period of 6 months from the date of transfer of the asset.

How to buy IRFC Capital Gains Bonds?

  • Download IRFC 54EC Capital Gain Bond Application form 2023-24
  • Attach the following documents:
    • Self-attested PAN card and proof of address 
    • Canceled cheque copy
    • Cheque / DD should be drawn in favor of “IRFC Capital Gain Bonds”
    • Keep photocopy of the application form for your record
  • Get in touch with an intermediary like SBNRI for further process to buy capital gains bonds
  • Or you can submit your application form at a listed bank branch. 
  • You will get an acknowledgement copy for your taxation purpose.
  • IRFC will issue the Bond Certificates within 2 months from the date of allotment
  • Bonds will reflect in your Demat account within 8-10 weeks from the date of allotment.

NRI Investment in Bonds is a very popular and rewarding opportunity. In addition, capital bonds offer dual benefits of wealth creation and tax saving. If you have any doubts or queries and want specialized advice from experts at SBNRI, contact us using the button below. Also visit our blog and YouTube Channel for more details.

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Is interest earned on IRFC capital gain bonds taxable?

Yes. Interest income from purchasing IRFC bonds is taxed, but there is no TDS on it.

What is the minimum amount that I can invest in IRFC capital gains bonds?

You need to invest a minimum of Rs. 20,000 and maximum of Rs. 50 lakh in capital gains bonds in a financial year.

What is the TDS on 54EC bonds?

No TDS is applicable on interest income from capital gains bonds.

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