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REC/NHAI BOND

CA. Rohit Vishambhari, Vns. (Chartered Accountant) (150 Points)

04 August 2010

Is there any tax liability under the provisions of the Income Tax Act on redemption of NHAI and/or REC bonds purchased for the purpose of section 54EC after the statutory time limit of 3 years from the date of its acquisition.

Post your views with reference of respective sections. It's Urgent.

Thanks to all in advance...........

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5 Replies

Amir (Learner) (4016 Points)
Replied 04 August 2010

Dear Sir,

Bond is a Capital Asset u/s 2(14) and its redemption/maturity is considered as "TRANSFER" u/s 2(47)

Second proviso (Indexation) to Sec 48 is not available to Bonds except CAPITAL INDEXED BONDS.

Bonds are supposed to matured at par i:e Sale Price = Cost Price and hence there will not be any gain / loss.

However if sale price is not equal to cost price (including expenses on transfer) then Capital Gains shall be computed...

The above treatment shall be valid for all types of Bond except Deep Discount Bonds.

Sharat.Deshpande (Director) (23 Points)
Replied 12 August 2010

Drear Sirs,

My reswidential Plot was acquired by Govt. and compensation is received. Does it atterat capital gain Tax/

If I invest the same or Part of it in REC/NHAI bonds, I know the inerest is taxable, will I be laible to pay tax on pricipal amount after redemption on completion of three years?

Sharat. Deshpande

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 12 August 2010

Dear Sharat,

First of all, transaction u mentioned is liable for capital gain tax.

However, u can save tax by investing in REC/ NHAI Bonds. No tax would be applicable on the principal redemption amount. tax would be levied only on interest on redemption of bonds.

regards,

Manoj