REC 54EC Bonds

Section 54EC Capital Gains Bonds is one of the best ways to save long-term capital gains tax. These bonds are specifically meant for those investors who are earning long-term capital gains on the sale of houses, land, building, or any other property and would like tax exemption on these gains. The tax deduction is available under Section 54EC of the Income Tax Act,1961. Public sector companies like REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd), NHAI (National Highways Authority of India), and IRFC (Indian Railways Finance Corporation Limited) are eligible issuers of capital gains bonds under Section 54EC. They

REC 54EC Capital Gain Tax Exemption Bonds – Series XV

The existing bonds series i.e. REC 54EC CGTE Bonds – Series XIV was open till 31st March 2021 and the bonds under Series –XIV were allotted to the investors whose application money was credited to REC’s 54EC Collection Accounts on or before 31st March 2021.

REC Limited is now going to launch a new series of 54EC Capital Gain Tax Exemption (CGTE) Bonds Series - XV w.e.f. 01st April 2021. The investors whose application money gets credited in REC’s 54EC Collection Accounts on or after 01st April 2021 will be allotted bonds under the new series of bonds i.e. ‘REC 54EC Capital Gain Tax Exemption Bonds – Series XV’.

Structure of REC 54EC Bonds

Issue	REC Capital Gains Tax Exemption Bonds- Series XV
Credit Rating	‘ICRA AAA’ by ICRA Limited. ‘CARE AAA’ by Care Limited. 'CRISIL AAA’ by CRISIL Limited. ‘IND AAA’ Rating by India Ratings and Research Private Limited.
Issue Size	Rs 1500 Crore plus green shoe option to retain the oversubscription
Face Value	Rs 10,000 per bond
Issue Price	Rs 10,000 per bond
Coupon Rate	5.00 % annual
Issue Date	Opening date: 1st April, 2021 Closing date: 31st March, 2022
Minimum application size	2 Bonds of Rs 10,000/- each
Maximum application size	500 Bonds of Rs 10,000/- each i.e. a maximum of Rs 50 lakhs in a financial year
Tenor	5 years from the deemed date of allotment.

* Application for a minimum of Rs 20,000 & in multiples of Rs 10,000 thereafter will be accepted for these bonds. However, any amount received in fraction will be refunded to the investor without interest.

Features of REC 54EC Bonds:

Some of the features of REC 54EC Bonds are:

Safety: These bonds are government backed bonds with AAA credit ratings, hence, the risk of interest and capital payment is protected.
Interest: Interest on REC 54EC bonds is taxable. No TDS is deducted on interest from these bonds and also, wealth tax is exempted.
Tenure: These bonds have a lock-in period of 5 years from the deemed date of allotment and are non-transferable.
Coupon Rate: These bonds offer a coupon rate of 5.00 % which is payable annually (w.e.f. 1st April 2021).
Investment Amount: In a fiscal year, the minimum cap size is 2 bonds amounting to Rs 20,000 and the maximum investment size is 500 bonds amounting to Rs 50,00,000.
Listing: The Bonds are not proposed to be listed on any stock exchange due to the non-transferability of Bonds in the lock-in period.

Who can invest in REC 54EC Bonds?

Individuals
Hindu undivided families
Partnership Firm
Limited liability partnership
Insurance companies
Companies and body corporates
Provident funds, superannuation funds and gratuity funds
Banks
Mutual funds
Financial institutions
Foreign portfolio investors (Subject to existing regulations)
Regional rural banks
NRIs and other foreign eligible investors
Co-operative banks
Any other investor subject to applicable laws

How to apply for REC 54EC bonds?

By depositing the application form to the registrar with Cheque/DD

Application form: 54 EC Capital Gains Tax Exemption (CGTE) Bonds: Series-XV(2021-22): Click here

By RTGS/NEFT payment: The Investor can also directly deposit the amount in the REC 54 EC Collection Account by way of NEFT/RTGS.
By online payment: The Investor can also directly apply through REC’s website (https://www.recindia.nic.in/54EC - Application form: 54 EC Capital Gains Tax Exemption (CGTE) Bonds: Series-XV (2021-22) – NEW) and apply for the funds online through net banking.
By Post: The applicants may forward their applications through speed/ registered post to any of the controlling branches of the collection bankers along with a Demand Draft.

Documents Required

1. Self-attested copy of PAN card

2. In case of Joint application, self-attested PAN copy of all the applicants) or Form 60 without PAN.

3. Cancelled cheque for interest or redemption transactions through the NEFT or RTGS facility.

4. Self-attested copy of address proof.

Why invest in REC 54EC bonds?

Above mentioned benefits in this article put forward the reason for investing in these bonds. As mentioned, these bonds offer a coupon rate of 5.00 % which is payable annually. Along with the tax exemption on capital gains, risk-free payouts make these bonds apt for investors with low risk appetite and who want a tax exemption on their capital gains.

Frequently asked questions

1. Which bonds are eligible under Section 54EC?

Bonds issued by public sector companies such as REC (Rural Electrification Corporation), NHAI (National Highways Authority of India), IRFC (Indian Railway Finance Corporation) & PFC (Power Finance Corporation Ltd) for capital gains exemptions are eligible under Section 54 EC.

2. What is the latest coupon rate of REC 54EC bonds?

REC 54EC bonds offer a coupon rate of 5.00% payable annually (w.e.f. 1st April, 2021).

3. What is the lock-in period of REC 54EC bonds?

The lock-in period for the REC 54EC bonds is 5 years.

4. Are REC 54EC bonds risk-free?

Since these bonds are backed by the government, repayment of principal and interest are therefore safe and secure.