54EC Capital Gain Bonds (Section 85): How to Invest in 2026

Capital gain bonds, still called 54EC bonds, let you save long-term capital gains tax on the sale of land or a building by investing the gain, within six months of the sale, in bonds of REC, PFC, IRFC or HUDCO. You can invest up to ₹50 lakh in a financial year; the bonds pay 5.25% a year and are locked in for five years. From 1 April 2026 the exemption sits in Section 85 of the Income-tax Act, 2025; under the 1961 Act it was Section 54EC, and the rules did not change.

What are 54EC (Section 85) capital gain bonds?

Capital gain bonds are five-year bonds issued by public-sector companies that the government has notified for this purpose. When you sell land or a building you have held long enough for the gain to be long-term, and invest that gain in these bonds within six months, the amount invested is exempt from capital gains tax. The money is not spent; it earns interest for five years and is returned to you at maturity.

Who issues them in 2026?

Four issuers have open series for FY 2026-27, all rated AAA:

NHAI's series has been closed to new money since September 2022; existing NHAI holders keep their bonds until maturity. The terms of all four open series are the same in substance, so the choice usually comes down to which application is most convenient for you.

Who can invest and how much?

• Who: individuals, HUFs, and NRIs (from an NRO account, on a non-repatriable basis), and other assessees with a qualifying gain.
• Which gains: long-term capital gains from the transfer of land, a building, or both. Gains from shares, mutual funds or gold do not qualify.
• Minimum: ₹20,000 (two bonds of ₹10,000).
• Maximum: ₹50 lakh (500 bonds) in a financial year. Only the amount invested is exempt; if your gain is larger, the excess is taxed.

The six-month deadline

The investment must be made within six months of the date of transfer of the property, usually the registration date. Miss it by a day and the exemption is lost entirely; there is no partial relief. Two practical points: the date that counts is when the issuer receives your money, so do not apply in the final week; and if the six months cross 31 March, the ₹50 lakh limit still applies to the sale as a whole, not twice.

Interest, lock-in and tax

• Interest: 5.25% a year, paid annually. It is taxable at your slab rate, but no TDS is deducted, so include it in your return.
• Lock-in: five years from the deemed date of allotment. The bonds cannot be sold, transferred or pledged for a loan in that time; redeeming early is not possible.
• If you break the conditions: taking a loan against the bonds or transferring them within five years makes the exempted gain taxable in that year.
• Form: a demat account is not required; the bonds can be held in physical form.

How to apply, step by step

1. Work out the gain. Sale price minus indexed or actual cost, as the rules for your purchase date allow; your CA will confirm the figure. The capital gain bonds calculator shows the tax saved for any amount.
2. Pick the issuer and download that series' application form and filled sample from its page.
3. Attach the documents: PAN, address proof, a cancelled cheque, and demat details if you want the bonds in demat.
4. Pay the issuer directly by cheque or online transfer to the issuer's collection account. Never pay a broker or agent in their own name.
5. Submit the form to a designated collecting bank branch, or through a broker registered with the issuer, and keep the acknowledgement.
6. Keep the allotment letter or certificate for your tax return and for the five-year maturity.

Where to invest in 54EC bonds in Pune

In Pune you can apply at the issuers' designated collecting bank branches, online through broking platforms, or through a broker registered with the issuers. Sanriya Finvest, at Kamdhenu, Senapati Bapat Road, Shivajinagar, distributes REC, PFC, IRFC and HUDCO capital gain bonds: we check the six-month date with you, fill the form against the issuer's sample so it is not returned, and send it to the collecting bank, while your payment goes straight to the issuer. The application costs you nothing; we receive brokerage from the issuer when the form carries our broker code.

Capital gain bonds or a new house?

The tax law gives a property seller other routes too, such as reinvesting in a residential house. Bonds suit you if you do not plan to buy a house soon, want the gain kept safe and liquid at maturity, and are content with 5.25% taxable interest. Compare the post-tax return with your other options before you decide; the decision is yours, and your CA should confirm the tax treatment for your case.

This article is general information, current as of October 2026, and not tax advice. Rates and issuer series change; check the issuer's current information memorandum before investing.