| The amount of capital gains made by a tax paying individual or entity (after deducting the purchase/transaction costs and adjusting for indexation) can be invested in notified bonds under section 54 EC. These bonds are called Capital Gains Tax Savings Bond. The minimum holding period is 3 years. Capital gains savings bonds are those issued by the following institutions: REC & NHAI |
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| Investors should ensure that these bonds are not transferred or converted within a period of 3 years from the date of acquisition. In such an event gains would be taxable. |
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| When a property is sold and a long-term capital gains liability arises, the assessee has an option to avoid it by investing the capital gains in another property within the specified time duration. |
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| The other option available to him to avoid paying tax is by investing the requisite sum in capital gains bonds within a period of 6 months from date of transfer. |
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| These bonds have to be held for a period of 3 years and no loan, mortgage or any encumbrances should be created on these bonds. However the interest on these bonds is taxable. |
