(Last Updated On: February 18, 2017)

Expanding the scope of long term bonds under 54EC

[Section 54EC of Income Tax Act – Applicable from Assessment Year 2018-19]

The existing provision of section 54EC of Income Tax Act provides that capital gain to the extent of Rs. 50 lakhs arising from the transfer of a long-term capital asset shall be exempt if the assessee invests the whole or any part of capital gains in certain specified bonds, within the specified time. Currently, investment in bond issued by the National Highways Authority of India or by the Rural Electrification Corporation Limited is eligible for exemption under this section.

In order to widen the scope of the section for sectors which may raise fund by issue of bonds eligible for exemption under section 54EC, it is proposed to amend section 54EC so as to provide that investment in any bond redeemable after three years which has been notified by the Central Government in this behalf shall also be eligible for exemption.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

[Clause 27]

Relevant Extract of Clause 27 of Finance Bill 2017

Amendmentof section 54EC.

27. In section 54EC of the Income-tax Act, in sub-section (3), in the Explanation, in clause (ba), for the words and figures “the Companies Act, 1956” occurring at the end, the words and figures “the Companies Act, 1956; or any other bond notified by the Central Government in this behalf” shall be substituted with effect from the 1st day of April, 2018.