54EC Capital Gain Bonds are a type of financial instrument issued by specified institutions in India. These bonds provide a tax-saving option for those who have incurred long-term capital gains from the sale / transfer of long-term capital assets being land, building or both. The entire capital gain amount invested in these bonds would be exempted from tax u/s 54EC.
The Finance Act 2017 provides that in case of an immovable property being land or building or both, the period of holding should be 24 months or more to qualify as long-term capital asset.
The primary purpose is to defer the tax liability on long-term capital gains by investing the proceeds from the sale of capital assets (land, building or both) in these bonds. This allows taxpayers to save on capital gains tax.