Under Section 54 EC of Income Tax, 1961 an investor need not pay any tax on any long-term capital gains arising on sale of any asset, if the amounts of capital gains are invested in certain specified bonds. Rural Electrification Corporation Limited (REC) & National Highways Authority of India (NHAI) are permitted to issue capital gains bonds under Section 54 EC.

Some key features of Section 54 EC bonds are :-

• AAA rated
• Interest is taxable although no TDS is deducted
• Lock-in of 3 years and non- transferable
• Minimum investment-1 Bond amounting to Rs. 10,000/- and maximum investment-500 Bonds amounting to Rs. 50 lakhs in a financial year 
• Rate of Interest 6.00% p.a. payable annually
• Bonds can be held in Demat /Physical Form
• Facility of Payment of Interest and Redemption through NECS 
• The Bonds will automatically redeem after expiry of three years