Capital Gain be saved Under Sec 54EC or Sec 54F, if the land or property sold is non agriculture. We deal in such bonds which qualify for Sec 54EC Bonds.

• Tax can be saved under Section 54 EC by investing in bonds
• Tax can be saved under Section 54 F by investment in New residential house

• Long Term Capital Asset Long term assets means any capital asset held by assessee for more than 3 Years.


• If assesee has sold the Long term capital asset during the previous year and made a long term capital gain then he can invest money of capital gain in Capital gain bonds and can save tax on long term capital gain.


• Assessee here means all type of assessees,like individual,firm company etc.


• Amount to be invested in bonds is only capital gain not net consideration received on sale of long term capital asset


• Amount exempted under this section will be amount of capital gain or amount invested in capital gain bond which ever is lower maximum up to 50Lakh(see note below)


• These Bonds Maturity Period is Three years


• Capital gain bonds eligible under this section are now can be issued only by REC or NABARD
• Bonds can not be pledged ,sold transfer before completion of three year from purchase of bonds ,and in case its transferred then amount capital gain exempted on investment in these bonds will be made taxable in that previous year as Long term capital gain .


• Amount of capital gain should be invested in Capital gain bond within 6 Month from date of transfer/sale of capital asset .

One more good news for you that 50 lakh Limit is for each financial year. As your six month limit is fall in two different Financial years so you can save 50 lakh in fy 2008-09 and 50 lakh in 2009-10.so one can save upto maximum of one crore of capital gain u/s 54EC.

Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.

A debenture is a document that either creates a debt or acknowledges it, and it is a debt without collateral. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note.

A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital. Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories.

• Convertible debentures, which are convertible bonds or bonds that can be converted into equity shares of the issuing company after a predetermined period of time. "Convertibility" is a feature that corporations may add to the bonds they issue to make them more attractive to buyers. In other words, it is a special feature that a corporate bond may carry. As a result of the advantage a buyer gets from the ability to convert, convertible bonds typically have lower interest rates than non-convertible corporate bonds.
• Non-convertible debentures, which are simply regular debentures, cannot be converted into equity shares of the liable company. They are debentures without the convertibility feature attached to them. As a result, they usually carry higher interest rates than their convertible counterparts.

A high yield bond is debt security issued by corporations with lower than investment grade ratings. It is a major component – along with leveraged loans – of the leveraged finance market.

Non-investment grade ratings are those lower than BBB- (or its equivalent), while an investment grade rating (or corporate rating) is BBB- or higher.

A non-investment grade rating is important as it suggests a greater chance of an issuer’s default, wherein the company does not pay the coupon/interest due on a bond or the principal amount due at maturity in a timely manner.

Consequently, non-investment grade debt issuers must pay a higher interest rate – and in some cases they must make investor-friendly structural features to the bond agreement – to compensate for bondholder risk, and to attract the interest of institutional investors.

Some background is in order. The vast majority of loans are unambiguously private financing arrangements between issuers and lenders. Even for issuers with public equity or debt, and which file with the SEC, the credit agreement becomes public only when it is filed – months after closing, usually – as an exhibit to an annual report (10-K), a quarterly report (10-Q), a current report (8-K), or some other document (proxy statement, securities registration, etc.).

Beyond the credit agreement there is a raft of ongoing correspondence between issuers and lenders that is made under confidentiality agreements, including quarterly or monthly financial disclosures, covenant compliance information, amendment and waiver requests, and financial projections, as well as plans for acquisitions or dispositions. Much of this information may be material to the financial health of the issuer, and may be out of the public domain until the issuer formally issues a press release, or files an 8-K or some other document with the SEC.

Risk-averse investors now have new options to park their money. The interest earned on these bonds will not be subject to income tax. The interest on these bonds will be paid annually (for example 31st March every year) by credit into the account of the investor. There is no cumulative option.

These bonds will be eventually listed on the Bombay and National Stock Exchange, so investors will have the option of selling them before the full term of the bond. However, the price you may get for selling before they mature will depend on market conditions.

Investors get carried away by the effective yield on tax-free bonds. The effective yield is calculated as follows:

Effective yield = coupon rate/ (1-tax rate). Hence, for a coupon of 8.2%, an investor in the 30.9% tax bracket has an effective yield of 11.86%. The cash flow in the hands of the investor is only Rs 8.2 for every Rs 100 invested in the bonds, and the reason the yield is shown higher is due to the tax rate. Change in tax rate will change the effective yield on the bonds.

Effective yield is only relative in nature, not absolute. If the comparison is between investing in a ten-year fixed deposit of an AAA-rated bank at 8.2% which is taxable and investing in a ten-year maturity tax-free bond at 8.2%, then effective yield can be used as a measure for comparison. Investors can substitute tax-free bonds for fixed deposits as post-tax return is much better on tax-free bonds.

Investors wanting to park surplus funds in an asset that will give them an absolute return of 8.2% every year for ten years, or 8.3% every year for 15 years, irrespective of the returns available elsewhere, can invest in tax-free bonds. In such cases investors are content with the returns offered and have surplus money that can be locked in for ten or 15 years.