Monday, April 12, 2010

Capital Gains Bonds

Deep Discount Bonds

Deep discount Bonds were issued by IDBI, Small industries Development Bank of India (SIDBI), SCICI ltd., Krishna Bhagya Jala Nigam Ltd and many more. In the present day the investment in Deep Discount Bonds has lost its charm because the Government has clarified that the deemed interest for each year would be liable to tax.


Capital Gains Bonds


These bonds are issued by selected organization in terms of section 54EC of the Income Tax act 1961. The interest rate of these bonds is very low. Presently the interest is in between 5% to 5.5%p.a. But the interest earned by these bonds is taxable. Presently these Bonds are issued by NHAI and REC. The investor must read terms and condition before making investment. The maximum investment limits per person is RS50 lakh only. Generally the duration of these Bonds are 60 months. Early redemption are allowed but after 36 months. The investor has to exercise the put option not later than 3 months prior to the end of 36 months from the deemed date of allotment ie during the 33rd month from the deemed date of allotment would be different for five years and three years.

These Bonds are not transferable, non-negotiable and cannot be offered as security for any loan or advance. No tax is deducted at source on the interest on these Bonds. In sprite of the fact that the interest rate on these bonds is very low, those investor s who derive long term capital gains find it as a very ideal instrument of investment to save tax arising the gains in respect of short term capital gains. These Bonds are not recommended for persons having no long term capital gains.

No comments:

Post a Comment