# Section 54EC — Exemption on LTCG from Land/Building via Investment in Specified Bonds

## Eligibility

Eligible Assessee: Any person (individual, HUF, firm, company, etc.)
Asset Transferred: Land or Building (Long-Term Capital Asset)
Nature of Gain: Long-Term Capital Gain (LTCG)

## Investment Conditions

Where to Invest: Bonds of NHAI / RECL / PFC / IRFC / HUDCO / IREDA (redeemable after 5 years)
Time Limit: Within 6 months from the date of transfer

## Exemption Limit

Exemption = Lower of:

Capital Gain, OR
Amount Invested, OR
₹ 50 lakhs (overall ceiling)

## Withdrawal of Exemption

If the new asset (bond) is transferred or converted into money within 5 years, the amount earlier exempted becomes taxable as LTCG in the year of such transfer/conversion.

## Capital Gain Account Scheme (CGAS)

If investment is not made before the due date of filing Return of Income, the amount must be deposited under CGAS on or before filing ROI to claim exemption.

Worked example

### Example 1

Example: Mr. X sold land on 1.6.2025 for ₹ 80 lakhs (LTCG = ₹ 30 lakhs). He invested ₹ 45 lakhs in NHAI bonds on 1.10.2025. Investment within 6 months: yes. Exemption = Lower of (₹ 30 lakhs / ₹ 45 lakhs / ₹ 50 lakhs) = ₹ 30 lakhs. Taxable LTCG = NIL.

### Example 2

Withdrawal Example: Continuing above, if Mr. X sells the NHAI bonds in 2027 (within 5 years), ₹ 30 lakhs earlier exempted becomes taxable as LTCG in P.Y. 2027-28.

⚠️ Common exam mistakes

Applying section 54EC on STCG — it applies only to LTCG.
Forgetting the ₹ 50 lakh overall ceiling per assessee per F.Y.
Investing after 6 months and still claiming exemption.
Using a 3-year lock-in instead of the correct 5-year lock-in for bonds.

Bare-Act text Section 54EC · Income Tax Act, 1961 · click to expand

Section 54EC: Where the capital gain arises from the transfer of a long-term capital asset, being land or building or both, and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall not be charged to tax to the extent of such investment, subject to a maximum of ₹ 50 lakhs in a financial year.

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Exemption under Section 54EC - Investment in Specified Bonds

Worked example

⚠️ Common exam mistakes