The idea
If you make a long-term capital gain from selling land or a building, you can avoid tax on it by investing the gain in specified bonds within six months of the sale. They are known as 54EC bonds, after the section of the old Income-tax Act. The Income-tax Act, 2025 (in force from 1 April 2026) renumbered the section, but the scheme and the name people use carried over.
The rules
| Rule | Detail |
|---|---|
| Which gains | Long-term capital gains from land, building or both |
| Deadline | Invest within 6 months of the date of sale |
| Maximum | ₹50 lakh in all, across the year of sale and the next year |
| Lock-in | 5 years; no early exit, no loan against them, not transferable |
| Interest | 5.25% a year on current series, paid yearly; taxable |
| Issuers | REC, PFC, IRFC (and others the government notifies) |
| Minimum | Usually ₹20,000 (two bonds of ₹10,000) |
If you invest only part of the gain, only that part is exempt. If you sell or pledge the bonds within five years, the exemption is taken back.
Example
Ravi sells a plot in 2026 with a long-term gain of ₹30 lakh. At 12.5% plus cess, the tax would be about ₹3.9 lakh. If he puts ₹30 lakh into 54EC bonds within six months, the gain is exempt. His money then earns 5.25% (taxable) for five years — about ₹1.58 lakh a year before tax.
Is it worth it?
The rate is low, so compare: the tax saved now versus what the money could earn elsewhere for five years after paying the tax. For most people in higher brackets the exemption wins, but do the sums — or ask a chartered accountant — before the six-month deadline. Another route is reinvesting in a residential house, which has its own rules.
How to apply
Apply through the issuer's website, a bank branch that collects applications, or a broker. Keep the allotment letter for your tax return.
For general information only, not investment advice or a recommendation. Oxon Fintech is a loan facilitation platform, not a SEBI-registered investment adviser, bank or mutual fund distributor, and does not sell bonds, deposits or funds. Rates and rules are as checked on the date above; confirm with the issuer, bank or fund house before investing. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.