Exemption of Long-Term Capital Gains On Investment In Bonds of NHAI & REC in case of NRI

[Capital Gain of an NRI could be Completely Exempt from Income Tax]

With effect from the A.Y. 2001-2002, a new Section 54EC was inserted in the 1.T. Act to provide for exemption in respect of long-term capital gains in the hands of any assessee, whether an NRT or a resident assessee. This exemption is in respect of long-term capital gains of any asset which are invested in select bonds, redeemable after a period of three years issued on or after 1 April 2000 by the National Highways Authority of India (NHAI) and on bonds of Rural Electrification Corporation Ltd., etc. The exemption from income tax on long-term capital gains of the NRI would be to the extent of investment not exceeding 50 lakh in these bonds. These bonds have a lock-in-period of three years. Interest rate is around five and a half per cent per annum. Any transfer or conversion of bonds into money during the lock-in period would make the amount so converted as deemed capital gains to be taxable in the year of transfer or conversion. Similarly, such deemed capital gains would also arise, if any loan or advance is taken on the security of these bonds.

 

As per the Finance Act, 2006 the Bonds issued only by NHAI and REC would qualify for exemption of long-term capital gains under Section 54EC, as are issued on and after 1.4.2006.
 
Capital Gain of an NRI could be Completely Exempt from Income Tax
1. Exemption of Long-Term Capital Gains regarding Residential House Property (Section 54)
2. Exemption of Long-Term Capital Gains from any Capital Asset On Investment In House Property (Section 54F)
3. Exemption of Long-Term Capital Gains On Investment In Bonds of NHAI & REC
4. Exemption to facilitate the Conversion Of Partnership Firm into a Company
5. Exemption from the Levy Of Capital Gains Tax to facilitate Conversion Of Sole Proprietary Concern Into A Company
6. Computation of Capital Gains In Real Estate Transactions
7. Other Important Exemptions Regarding Capital Gains Available to NRI
8. Cost Inflation Index And Computation Of Capital Gains in case of NRI
9. Reduction Of Tax Rate On Long-Term Capital Gains In Regard To Shares And Securities
10. Concessional Rate Of Tax On Income From Certain Global Depository Receipts
11.Tax Treatment Of Capital Gain On Sale Of Shares, Debentures, Etc. Received Under ESOP
12.Provisions Relating To Set-Off Of Long-Term Capital Loss And Carry Forward Thereof ModifiedSections 70 and 74
13. Exemption Of Long-Term Capital Gains On Securities And Lower Tax On Short-Term Capital Gains
14. Issue of Foreign Currency Exchangeable Bonds Scheme, 2008
15. Miscellaneous provisions’ regarding Capital Gains in case of NRI
 
 
 
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