The Central Board of Direct Taxes (CBDT) today notified that Bonds of Indian Railway Finance Corporation will be exempted from Income Tax under section 54EC of the Income Tax Act, 1961.
The Notification stated that “any bond redeemable after three years and issued by the Indian Railway Finance Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), on or after the date of publication of this notification in the Official Gazette, as ‘long-term specified asset’ for the purposes of the said section.”
Section 54EC of Income Tax Act, 1961 provides an option to save tax on capital gain arising from transfer of long term capital asset subject to fulfillment of the following conditions.
Firstly, the asset transferred should be a long term capital asset and hence there should be a long term capital gain. Secondly, such capital asset should have been transferred after 1-04-2000 by the assessee. thirdly, the assessee has within a period of 6 months after the date of such transfer has invested the capital gain in the long term specified asset. Fourthly, specified assets are the bonds redeemable after 3 years issued by National Bank for Agriculture and Rural Development (NABARD) or by the National Highways Authority of India (NHAI) or the bonds issued by Rural Electrification corporation Ltd. lastly, the cost of long term specified assets which is considered for the purpose of exemption u/s 54EC, shall not be eligible for deduction with refernce to such cost u/s 80C. It means investment made in bonds u/s 54EC is not eligible for deduction u/s 80C.
The capital gain for the purpose of the above section shall be exempted only to the extent it is invested in the long term specified assets within a period of 6 months from the date of such transfer.
Read the Full Text of the Notification Below