PFC Bonds eligible for claiming exemption u/s 54EC

The section allows a deduction in respect of long-term capital gains arising from sale/transfer of any long-term capital asset (like any immovable property, jewellery or shares) which was held for a period exceeding 3 years. The holding period should be one year in case of equity shares. Any profit arising from the sale of long term capital assets is called as long term capital gain and is chargeable to tax at the rate of 20%. However, you can save this tax if you invest the amount of capital gains in long term specified bonds as notified by the government under section 54EC for a minimum period of 3 years. In order to claim exemption from capital gains tax by investing in the bonds of PFC, REC or NHAI under sec 54EC, following conditions must be kept in mind:

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The bonds should not be transferred or converted into money at any time within a period of 3 years from the date of its acquisition. Otherwise the capital gain so exempted will be chargeable to tax in the year in which such bonds are transferred or converted into money.

Any loan or advance taken on the security of such bonds is also not allowed. It is considered as conversion of such bonds into money.