Capital Gains Bonds Compare

Additional Useful Information

• When an investor purchases a Capital Gain Bond, the issuing company is bound by a legal contract wherein they are obligated to make interest payments as per the coupon rate to the investor.

• Every Bond is assigned a credit rating by a credit rating agency. Higher credit ratings mean that the safety of the investment is higher, and therefore risks involved are lower. However, lower credit means that the risks of investing in such bonds are higher.

• Investing in Capital Gain Bonds is suitable for investors who want to save tax on capital gains earned in the sale of property. The property must be held for more than 24 months, only after which tax saving via purchase of capital gain bonds can be done.

• These bonds are issued by government backed entities.

Returns *

• Capital Gain Bonds can guarantee returns for the investors in the form interest payments. These payments are in line with the pre-defined interest rates specified in the bond terms and conditions i.e. the Coupon Rate.

• Capital Gain Bonds are not tradable, meaning that they cannot generate a capital gain/loss.

• Typically, Perpetual Bonds can generate returns ranging from 5% to 6% per year depending on the duration for which they are held and their credit ratings.

Risk Level

• Capital Gain Bonds are considered very low risk investments.

• Capital Gain Bonds have credit risk associated with them. This means that if the company issuing these bonds default in their commitments, the investor can make losses on the investment. However, this risk is minimal.

Liquidity

• Capital Gain Bonds are not liquid. They are not tradeable or transferable, which means they cannot be sold.

• Once investors invest in capital gain bonds, there is a 5-year lock in period. There is an automatic redemption after the lock in period ends. This means that investors hold the bond to maturity.

Interesting Facts

• To obtain the tax-exemption the investment in these bonds must be made within 6 months of the date of the sale of the property.

• The investment in these bonds is eligible for exemption under Section 54EC.

• The maximum amount investors can invest in these bonds is ₹50,00,000.

Tax Implications

• Earnings received from Capital Gain Bonds are taxable.

• Interest earned by investors from Capital Gain Bonds are to be added to their total taxable income and taxes are required to be paid as per the income tax slab.

• Since these bonds are not tradeable, capital gains taxes are not applicable since there are no gains due to any trading.

Where To Invest

• https://goldenpi.com/collections/capital-gain-54ec-bonds

• https://www.hdfcsec.com/productpage/54-ec