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Tax planning

Sec 85 (old 54EC) bonds within 6 months, up to ₹50 lakh

  • If you sell land or a building held long term, you can save tax on up to ₹50 lakh of the gain by putting it into notified 5-year bonds (NHAI, REC and others) within 6 months of the sale.
  • Deadline: Invest within 6 months from the date of transfer of the land or building. Bonds locked in for 5 years.
  • Done in 1 working day to plan; bond allotment by issuer, usually within weeks
  • Prepared by your Savvy, checked by a CA
  1. Sale deed with registration date
  2. What is the exact date of transfer
  3. Compute the long-term gain on land or building
  4. Bond investment plan with deadline date
The law and the stepsPay and start · ₹1,499Per event, + 18% GST

Answer in brief

If you sell land or a building held long term, you can save tax on up to ₹50 lakh of the gain by putting it into notified 5-year bonds (NHAI, REC and others) within 6 months of the sale. We work out how much to invest, check which bonds are open, help with the application and report the exemption.

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From the official sources

What the law says, and what trips people up

From the official portal's manuals and FAQs, with the source for each point.

The law

  • Income-tax Act 1961, Sec 54EC(1) (now Sec 85)

    Long-term gain from land or building or both is exempt to the extent invested within 6 months of transfer in a long-term specified asset; proportionate if less than the gainSource

  • Income-tax Act 1961, Sec 54EC(1) (now Sec 85) provisos

    Investment in such bonds cannot exceed ₹50 lakh in a financial year, and ₹50 lakh in total across the year of transfer and the next yearSource

  • Income-tax Act 1961, Sec 54EC (now Sec 85) Explanation (b)

    For investments from 1 April 2018: bonds issued on or after that date, redeemable after 5 years, by NHAI, REC or other notified issuersSource

  • CBDT Notification No. 31/2025 dated 7 April 2025

    HUDCO bonds redeemable after 5 years notified as a long-term specified assetSource

  • Income-tax Act 1961, Sec 54EC(2) (now Sec 85)

    If the bond is transferred or converted into money within 5 years, or a loan is taken against it, the exempted gain is taxed in that yearSource

  • Income-tax Act 1961, Sec 54EC(3) (now Sec 85)

    Cost of the bonds cannot also be claimed under Sec 123 (old Sec 80C)Source

  • Income-tax Act 2025, Sec 85 (corresponds to old Sec 54EC)

    From tax year 2026-27; practitioner view that the new wording ('long-term capital gains' from land or building) may exclude gains on depreciable buildings deemed short term under Sec 74Source

  • Income-tax Act 1961 to 2025 mapping

    Old Sec 54EC corresponds to new Sec 85Source

  • Government fee

    No government fee. Bonds are bought at issue price from the issuer; interest is taxable each year. Tax on any gain above the invested amount at 12.5% (or 20% indexed for residents with property bought before 23 July 2024). Source: https://incometaxindia.gov.in/Tutorials/15-%20LTCG.pdf

  • Late fee or penalty

    No extension in the Act: investment after 6 months loses the exemption, although a tribunal excused delay where bonds were not available. Source: https://www.taxmanagementindia.com/web/tmi_blog_details.asp?id=361219 . Late return fee under Sec 428 (old Sec 234F). Source: https://www.incometaxindia.gov.in/w/section-234f

On the portal

  1. e-File > Income Tax Returns > File Income Tax Return > AY 2026-27 > ITR-2
  2. Schedule CG > Long-term > land or building entry for the property
  3. In deductions, select Sec 54EC and enter the amount invested and date of investment
  4. Check that the exemption does not exceed ₹50 lakh and the gain on that property
  5. Pay any balance and e-verify

What trips people up

  • Bonds bought after the 6-month window because the issue was closed

    Plan early; one tribunal excused delay for non-availability, but the Act has no extensionSource

  • Took a loan against the bonds within 5 years

    This is treated as conversion into money and the exemption is withdrawnSource

  • Claimed 54EC on gain from shares or gold

    Only gains on land or building qualify; use Sec 54F for other assetsSource

  • Split ₹50 lakh in March and ₹50 lakh in April to invest ₹1 crore

    Cap is ₹50 lakh across the year of transfer and the next yearSource

People ask

Which bonds qualify?

5-year bonds issued from 1 April 2018 by NHAI, REC or other notified issuers; HUDCO was notified in April 2025.Source

Can I use 54EC and Sec 54 on the same sale?

Yes, each on different parts of the gain, as long as each section's conditions are met.Source

Can I claim 80C on these bonds?

No. Sec 54EC(3) bars it.Source

Does the new Act from April 2026 change 54EC?

It becomes Sec 85; experts flag a possible change for depreciable buildings, so check before relying on it for business property.Source

IDFD

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  • Sale deed with registration date
  • Long-term gain computation
  • Bond application and allotment letter
  • Earlier 54EC investments this year and next
  • PAN, KYC and bank details

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Per event. Delivered in 1 working day to plan; bond allotment by issuer, usually within weeks. Due: Invest within 6 months from the date of transfer of the land or building. Bonds locked in for 5 years.

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