Bonds
Capital gain bonds or 54EC bonds are the fixed income instruments that provide capital gains tax exemption under section 54EC to the investors. The tax liability on long-term capital gains from sale of immovable property can be reduced by purchasing 54EC bonds.
The owner of the bonds are the debtholders or creditors of the issuer. These bonds are issued by infrastructure companies that are backed by the government. Hence, the risk factor gets mitigated by buying such bonds. The capital gain bonds are redeemable before maturity.
One cannot sell these bonds as they are not listed in the stock exchange. The interest is reduced to 5% p.a. from 6% p.a. and are fully taxable in your hands.
As per the Reserve Bank of India SGBs are government securities denominated in grams of gold. These are the substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by the Reserve Bank of India on behalf of the Government of India. The issue price and redemption price depends on the price of gold as per the IBJA Rate. Here the investor also gets a return in form of Interest Income for every Sovereign Gold Bond investment which is determined at the time of issue. Interest is calculated on the face value amount which is 2.5% per annum. Here the investor receives interest every 6 months till maturity or redemption date. These bonds have a tenure of 8 years and can be redeemed after 5th year.
