Should I Invest 34 Lacs or 13 Lacs in 54EC Bonds?

Ans: No, you cannot split the capital gain amount and invest it in two different financial years for claiming deduction under section 54EC. The limit of Rs. 50 lakh is an annual limit, which means you can invest up to Rs. 50 lakh in one financial year to claim the deduction.

Therefore, in your case, you can invest a maximum of Rs. 50 lakh in eligible bonds under section 54EC during the financial year 2022-2023 to claim the deduction. You cannot carry forward the unutilized limit of Rs. 20 lakh to the next financial year.

It is important to note that the bonds under section 54EC have a lock-in period of 5 years. You cannot sell or transfer these bonds for a period of 5 years from the date of purchase.

Ans: Assuming flat was acquired between 1.4.2002 t 31.12.2002, indexed cost will be Rs.15,24,571 and accordingly gain amount of Rs.6,75,429 is required to be invested in 54EC bonds

Ans: Property in Joint Name
Net Proceeds: Rs. 27 lacs
Prepaid Home Loan: Rs. 27 lacs
Calculate capital gains on your share.
Property in Wife's Name
Net Proceeds: Rs. 10 lacs
Calculate capital gains considering her holding period and purchase price.
Capital Gains Bonds Investment
Timeline
You need to invest in capital gains bonds within six months. This helps save on capital gains tax.

Bond Selection
Invest in government-approved capital gains bonds. They offer a safe way to defer taxes.

Best Investment Options for Balance Amount
Diversified Equity Funds
Equity Funds provide long-term growth. They suit your medium risk appetite.

Balanced Advantage Funds
Balanced Funds offer stability and growth. They mix equity and debt for balanced returns.

National Pension System (NPS)
You already have NPS. Consider increasing your contribution. It offers tax benefits and retirement savings.

Public Provident Fund (PPF)
PPF is a safe long-term investment. It offers tax benefits and assured returns. Increase your contributions here.

Benefits of Actively Managed Funds
Professional Management
These funds are managed by experts. They aim to outperform the market.

Higher Returns Potential
Actively managed funds often deliver better returns than index funds.

Disadvantages of Index Funds
Limited Flexibility
Index funds follow the market. They don’t adapt to market changes.

No Active Management
Index funds lack active management. This limits their growth potential.

Disadvantages of Direct Funds
Lack of Guidance
Direct funds lack professional advice. This can be challenging for investors.

Time-Consuming
Managing direct funds requires time and knowledge. This may not suit everyone.

Final Insights
Investing your capital gains wisely is crucial. Use capital gains bonds for tax savings. Diversify your remaining funds in equity, balanced funds, NPS, and PPF. Actively managed funds offer better growth. Avoid index and direct funds due to their limitations. Regularly review and adjust your investments.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You’ve clearly explained the purchase cost, sale value, and related expenses. That helps a lot in giving an accurate and comprehensive answer.

Let us now assess your capital gains liability, step by step, and guide you on how much to invest in capital gains bonds, along with which tax regime may benefit you more.

Understanding Long-Term Capital Gains (LTCG)
Since you purchased the flat in September 2013 and sold it in February 2025, the holding period is more than 24 months.

So this is classified as a long-term capital asset.

Therefore, the profit from this sale is considered as Long-Term Capital Gains (LTCG) and taxed accordingly.

Indexed Cost of Acquisition
To calculate LTCG, we must use the Indexed Cost of Acquisition, as per the Cost Inflation Index (CII).

Let’s now list down the known values:

Purchase Price = Rs 29.3 lakhs

Registration Charges = Rs 1.465 lakhs

Total Purchase Cost = Rs 30.765 lakhs

Year of Purchase = FY 2013-14 → CII = 220

Year of Sale = FY 2024-25 → CII = 363

Now apply indexation:

Indexed Purchase Cost = (Original Cost × CII in year of sale) ÷ CII in year of purchase

So:

Indexed Cost = (30.765 × 363) ÷ 220 = approx Rs 50.79 lakhs

Net Sale Proceeds
Sale Price = Rs 89 lakhs

Brokerage paid = Rs 1.5 lakhs

Net Sale Consideration = Rs 87.5 lakhs

Long-Term Capital Gain
Now compute the LTCG:

LTCG = Net Sale Value – Indexed Purchase Cost

= Rs 87.5 lakhs – Rs 50.79 lakhs = Rs 36.71 lakhs (approx)

This is your taxable long-term capital gain.

Exemption via Capital Gains Bonds (Section 54EC)
You can invest in capital gains bonds under Section 54EC to save tax.

Eligible bonds are from REC, NHAI, etc.

Maximum investment allowed = Rs 50 lakhs per financial year

Minimum lock-in period = 5 years

Interest = around 5.25% p.a. (taxable)

In your case:

LTCG is approx Rs 36.71 lakhs

So, invest Rs 36.71 lakhs in Section 54EC bonds before 6 months from date of sale (i.e., by August 2025)

This will give you 100% LTCG exemption

Earlier vs Revised Tax Regime
Here is how to think about it:

Earlier Regime:
Allows deductions like Section 80C, 80D, HRA, LTA, and home loan interest.

LTCG tax on property is 20% after indexation. This applies in both regimes.

However, if you have many deductions, earlier regime may reduce total tax.

New Regime (as per Budget 2023-24 onwards):
Lower slab rates but no major deductions allowed

LTCG tax on property remains the same – no extra benefit here

So the decision depends on your other income and deductions

In most cases:

If you claim 80C, 80D, housing loan, etc., then earlier regime is better

If your income is purely salary, and you don’t claim deductions, then new regime may help

But in your case, LTCG tax remains same in both

Additional Tips
Capital Gains Bonds must be held for 5 years. Premature exit is not allowed.

Interest is taxable every year. So factor that into your ITR.

Keep bank receipts, bond certificates, and sale documents safely for 6+ years.

File Schedule CG in ITR-2 next year (AY 2025–26)

What If You Don’t Want to Invest in Bonds?
You can also save LTCG tax by buying a new residential property under Section 54

Property must be bought within 2 years (or constructed within 3 years)

If planning to reinvest in property, do it within deadline

If not, 54EC bonds are simpler, more flexible

Final Insights
Your capital gain is around Rs 36.71 lakhs

Invest that amount in 54EC bonds before August 2025

You can save 100% capital gains tax legally

Choose earlier tax regime if you have deductions like 80C, housing loan, etc.

Keep proofs for cost, sale, brokerage, and 54EC investment for future tax queries

Plan carefully. This one-time decision affects your long-term finances

If you want help calculating future taxes or planning retirement income from property sales, always consult a Certified Financial Planner. It’s not just about tax-saving—it’s about protecting your wealth over time.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment