In order to reduce the amount of tax that you need to pay for your capital gains, you may choose to invest the profit earned from the sale of your property on capital gain bonds that are issued by NHAI and REC under Section 54EC. Long-term capital gains (LTCG) are taxable under the Income Tax Act. However, you can get exemption on G tax under Sections 54, 54F and 54EC. While the Sections 54 and 54F pertain to purchasing a house with the capital gains made, Section 54EC allows you to claim exemption from LTCG tax on the purchase of notified government bonds.
Exemption Under Section 54EC
Section 54EC states that if the profit made on sale of a long-term capital asset - whether an immovable property or shares and stocks - is invested by the taxpayer in 'long-term specified assets' within 6 months of the sale, then the capital gains are exempt from taxation. The 'long-term specified assets' referred to here are government notified bonds and securities, such as those released by the National Highways Authority of India (NHAI) and Rural Electrification Corporation (REC)..
