The Housing and Urban Development Corporation Limited (HUDCO) is now authorized to issue capital gain tax exemption bonds under Section 54EC of the Income Tax Act, 1961. This means if you have sold land or buildings and are stuck with a large capital gains tax, you can invest in HUDCO bonds to offset that tax.
Investments in HUDCO bonds starting from April 1, 2025, which can be redeemed after five years, will allow you to reduce your tax liability on capital gains. These bonds are a safe and government-guaranteed option for anyone looking to reinvest their profits and save tax.
HUDCO (Housing and Urban Development Corporation Ltd.) is a government-owned PSU that plays a major role in financing housing and urban development projects in India.
In this blog, we’ll explain everything you need to know about HUDCO Capital Gain Bonds, how they help you save tax, and how you can easily invest online.
We now have 4 Options to Invest in Capital Gain Bonds
When it comes to Capital Gain Bonds, you now have four great options to choose from, each offering tax exemption benefits under Section 54EC of the Income Tax Act. Here are the options
- 1. HUDCO Bonds (Housing and Urban Development Corporation)
- 2. REC Bonds (Rural Electrification Corporation)
- 3. IRFC Bonds (Indian Railway Finance Corporation)
- 4. PFC Bonds (Power Finance Corporation)
While all four options allow you to save on taxes after selling property, HUDCO Bonds stand out due to their government backing and security. These bonds are a safe, reliable investment, and they provide a straightforward way to reinvest your capital gains without worrying about the risk.
Why Should You Invest in HUDCO Capital Gain Bonds?
Here’s why HUDCO is becoming a preferred option for Section 54EC investors –
1. Government Backing and Credibility
HUDCO is a Central Public Sector Undertaking (CPSU), a low-risk, credit-worthy investment option. Its bonds are supported by the Government of India.
2. Saving Tax on Capital Gains
By investing in HUDCO bonds, you can save long-term capital gains tax up to 50 lakh either fully or partially.
3. Contribution to Infrastructure Growth
Your investment supports public housing, clean water, sanitation, and smart city initiatives, contributing to India’s development goals.
4. Fixed, Predictable Returns
HUDCO bonds provide fixed interest income of 5.25% per annum (revisable). Although not high, they are predictable and safe.
Key Features of HUDCO Capital Gain Bonds
| Feature |
Details |
| Capital Gain Bonds Interest Rate |
It offers a fixed interest rate of 5.25% per annum, payable annually. |
| Investment Amount |
Each bond is priced at 10,000. The minimum investment is 10,000 (1 bond), and the maximum is 50 lakhs (500 bonds) in a financial year. |
| Maturity |
These bonds have a lock-in period of 5 years, as per Section 54EC rules. |
| Transferability |
HUDCO bonds are non-transferable, not tradable, and cannot be pledged as security. |
| Form of Holding |
Available in both physical and demat form. |
| Tax Applicable on Interest |
Interest is fully taxable as per the investor’s income slab. No TDS for resident individuals, but TDS may apply for NRIs. |
Eligibility for Investment
- ● Individuals (Resident or Non-Resident Indians)
- ● Hindu Undivided Families (HUFs)
- ● Companies and Trusts
- ● Must invest within 6 months of selling the capital asset
- ● The capital asset sold must be held for more than 24 months
How to Invest in HUDCO Capital Gain Bonds Online
Investing in HUDCO bonds online is simple. You can register through registered financial distributors, like RR Finance or authorized banks and platforms. Here’s how –
Step-by-Step Process
1. Visit an Authorized Portal
Platforms like RR Finance offer an online investment option for HUDCO bonds.
2. Fill the Application Form
Provide basic details, including PAN, Address, and investment amount.
3. Upload Documents
Submit scanned copies of PAN card, address proof, and proof of capital gains.
4. Make Payment
Transfer funds via NEFT, RTGS, or internet banking. UPI and debit card options may also be available.
5. Receive Allotment
You will receive a bond certificate (physical or demat) once the bonds are allotted.
Things to Keep in Mind
● The bonds are locked in for 5 years. Pre-exit is not permitted.
● You can invest a maximum of 50 lakh in a financial year (across all 54EC bonds).
● The interest income is taxable , though no TDS is deducted in case of demat holdings.
● Always take advice from your financial advisor or tax consultant to strategize your capital gain reinvestment plan.
Conclusion
HUDCO Capital Gain Bonds offer a secure and tax-efficient option for individuals who want to reinvest their capital gains and avoid long-term capital gains tax. With a simple online investment process and the safety of a government-backed entity, HUDCO is now a reliable alternative to other Section 54EC issuers like REC, IRFC and PFC.
If you’re looking for a safe place to park your capital gains while saving tax, HUDCO 54EC bonds might be the right choice.
Frequently Asked Questions (FAQs)
Any individual, HUF (Hindu Undivided Family), company, or trust that has earned long-term capital gains from selling immovable property (like land or buildings) can invest in HUDCO 54EC Bonds to save tax.
You can invest up to ₹50 lakhs in a financial year across all 54EC bonds (including HUDCO, NHAI, REC, etc.).
You must invest the capital gains within 6 months from the date of property sale to be eligible for tax exemption under Section 54EC.
Yes, HUDCO is a government-owned entity, and these bonds are backed by the Government of India, making them a low-risk and safe investment option.
No, HUDCO bonds have a 5-year lock-in period. They are non-transferable and cannot be sold or pledged before maturity.
No, the interest earned is taxable as per your income tax slab. However, the capital gain you invest in these bonds is exempt from tax.