List of Capital Gain Bonds

The following organisations can only issue these bonds:

1. National Highway Authority of India (NHAI)
2. Rural Electrification Corporation (REC.)
3. Indian Railways Finance Corporation Limited (IRFC)
4. Power Finance Corporation (PFC)

• Determine Your Eligibility: Only individuals and HUFs can invest in 54EC Bonds.
• Investment Timeframe: To avail of deduction under 54EC of the I-T Act, you have to invest in 54EC Bonds within six months from the asset's sale date, which generated the capital gains.
• Check bond availability: First, you have to choose the most suitable bond for your investment. Then check their availability through the issuer’s website or your financial advisor.
• Determine Investment Amount: The minimum investment for an individual or HUFamount is ₹ 10,000, while the maximum is ₹50 lakhs in a financial year.
• Application process: Fill out the application form provided by the issuer and provide the required documents (like PAN card and address proof) along with a cancelled cheque or bank statement. You can pay through a demand draft or an account payee cheque if you are investing through a physical form. If you are doing it through a demat form, pay via NEFT/RTGS  through your broker or depository participant and mention the UTR number in the form.
• Investment Confirmation: Once your investment is accepted, you will receive a confirmation from the issuer stating the bond certificate number, investment amount, and investment date. Keep the bond certificate safe since you will have to produce it at maturity.

• The minimum investment is ₹10,000, while the maximum you can invest in 54EC bonds is ₹ 50 lakh in a financial year.
• To avail of the capital gain exemption, you must hold the bond for 5 years from the date of acquisition (if the bond is issued on or after 1st April 2018). If you redeem the bond before 5 years, the entire amount will be taxable under long-term capital gain.
• You will only get a deduction for the amount invested in 54EC bonds. Suppose you earn 40 lakh from selling a capital asset and invest 35 lakh in the 54EC bond. So, only 35 lakh will be exempted under section 54EC of the I-T Act. The remaining 5 lakhs will be taxable under ‘Long term capital gain’.
• You cannot claim a deduction under section 80C of the I-T Act for the investment made capital gain bonds.
• Since capital gain bonds have the highest credit rating and are backed by the government, they are considered relatively safe investments.
• Investing in capital gain bonds lets you reduce your capital gains tax liability and provides a fixed interest rate.

Tax Exemption -The most crucial factor when investing in capital gain bonds is that the entire invested amount is tax exempted. 
Stable Income - You can earn a stable interest income of 5.25% apart from reducing your tax liability. 
Accessibility - These PSU bonds are pretty accessible. You can subscribe to the same via online or offline mode. You can store these instruments either in a demat account or physical format. 
Low Risk of Default - Since capital gain bonds have the highest credit rating and are owned by the government, they come with a sovereign guarantee. So, the risk of default is low, and your investment is safe and secured.

• Capital gain bonds are non-liquid as they cannot be redeemed before 5 years.
• Capital gain bonds provide much lower returns than equity, mutual funds, and other debt options. Moreover, the interest earned on capital gains is taxable.
• Capital gain bonds are non-transferable.

Let's consider the following details for the example:
Purchase Price: ₹50,000
Redemption Value: ₹60,000
Holding Period: 5 years.
Here's how you can calculate the yield:

To calculate the capital gain, subtract the purchase price from the redemption value:
Capital Gain = Redemption Value - Purchase Price
                      = ₹60,000 - ₹50,000 = ₹10,000
To calculate the yield, divide the capital gain by the purchase price, multiply by 100, and express it as a percentage:
Yield (%) = Capital Gain/ Purchase Price * 100
                 = (₹10,000 / ₹50,000) * 100 = 20%
So, the yield here is 20%.
Please note that this example is for illustrative purposes only, and actual calculations may vary depending on the specific details of the bonds and the prevailing tax regulations.

If you have recently earned capital gains, but don’t want to pay tax on them, capital gain bonds are a good investment option. It also provides a fixed interest income apart from tax exemption. Capital gain bonds are good investment options if you are a risk-averse investor.