NHAI Bonds Discontinued! How to save Capital Gains Tax now?😥

NHAI Bonds were subscribed to save long-term capital gains tax on real estate properties under Section 54EC of the Income Tax Act, 1961 ('IT Act')

Are you worried, that you will have to pay 20% capital gains tax (CGT) on sale of your property?

You don’t know of any other option than NHAI Bonds under Section 54EC of the IT Act?

I have recently helped one of my clients save INR 10,73,282 in Capital Gains Tax last year

Here are 5 ways, which can help you in saving taxes too:

1. Buying another house, on sale of a house
   
   We have generally observed that, when someone sells his / her house, it is to buy another house

   
   Be it in a different town or a better house within the same city
   
   But should I be penalized for buying a new house by paying 20% CGT on indexed gains?
   
   Section 54 of the IT Act understands that too. That you shouldn’t be penalized
   
   Hence, if you buy a new house with your capital gains (100% of cap gains or more), then the income tax department won’t come after you

   
   Note: Long term capital asset under the IT Act means property and unlisted equity shares held for >24 months (among other things)
   
   Refer Section 2(42A) and Section 2(29AA) of the IT Act
   
   

2. Buying another house, on sale of any long term capital asset

   Wait, how is that different from point number one?
   
   Here, you get exemption on sale of any long term asset (other than a residential house) on buying / constructing a one residential house
   
   However, you should be note be having more than 1 residential house already and you should not buy another house of construct another one within 1 and 3 years respectively, of buying this house
   

3. Other 54EC options
   Government has also notified the following bonds (like NHAI Bonds) the investment in which will help you save CGT of 20%:
   
   a. REC (Rural Electrification Corporation Ltd) Bonds
   b. PFC (Power Finance Corporation Ltd) Bonds
   c. IRFC (Indian Railways Finance Corporation Limited) Bonds
   
   Just like NHAI, these are government backed entities and thus, the default risk in these bonds is very low.
   
   These are AAA rated bonds yielding 5% pre-tax returns
   
   Here, you can save CGT even on sale of non-residential property like, a shop in a mall or an office space you purchased of own-use or investment purpose
   
   

4. Buying equity shares of an ‘eligible company’
   If you sell a residential property and don’t feel like buying another property or saving in low-return yielding bonds, here is an option for you:
   
   Invest in an eligible start-up and that start-up in-turn invests in buying new plant and machinery
   
   But wait, I wan’t to invest in a tech-startup, is there still any hack left?
   
   Guess what? There is!
   
   So, your investee start-up can buy computer and computer software instead of machines if it is a tech-driven start-up and is certified by the relevant govt authority for the same
   
   The definition of eligible startup is given in Section 54GB read with Section 80-IAC of the IT Act
   
   However, this tax saving hack is not eligible for sale of a residential property after 31st March, 2022
   
   

5. Setting-off previous year capital losses
   I know many people who put their money in houses in the last one decade but ended up selling them in losses
   
   If not losses, then at least in indexed losses
   
   So, if you have sold a house in loss previously (within 8 years though) and you booked that loss in your Income-Tax Return by filing the return within due date, then you need not worry
   
   You can set-off that capital loss from your Long Term Capital Gains
   
   Even Short Term Capital Losses can be set-off against Long Term Capital Gains
   
   

Please note that there are certain conditions attached to these tax saving hacks, like might not be allowed to sell the new investment for certain number of years etc.

Do read the relevant sections for knowing more or consult your CA

You see, we just discussed that you should have filed your ITR and claimed your losses in time

There are many people who have this misconception, “I don’t need to file ITR because my total income is below 5 Lakhs”

Absolutely wrong! You might save lakhs in capital gains and other taxes if you are literate enough in these matters.

This is just one example, there are many other examples which even my parents (both of them are CAs) and young CA friends do not know of when it comes to Investing, savings and taxes

Well, even I discovered many of these hacks by learning from my practical experiences of dealing with clients and speaking to stalwarts of the investing and personal finance industry

Hence, I strongly recommend you to become a part of our personal finance club, where we teach you:

a. Building a very big-corpus by investing small amounts

b. Which is the best way to save huge sums of money (might not be PPF for you)

c. Saving hell lot of taxes every year from your capital gains, business and salary income (all of them legally and through hacks you might not have even heard of)

d. Planning for your parents’ retirement

e. How to prevent from shocks

f. How to not get fooled by intermediaries

So, here is our club where you can learn all these things and even ask your personalized queries

Here is a snippet of what my clients say for me:

You can join our free of cost LEARN PERSONAL FINANCE community (with over 1,200 members) as well:

Thanks folks. Do consider sharing this article with your friends

And stay tuned, to save hell lot of taxes and building generational wealth! :)

Disclaimer: Please note that the investment instruments shared here are solely for knowledge purposes. A person might have his / her own financial needs and risk appetite. Hence, it is important to bring to your note that our only purpose is to educate you and not render your any sort of investment advice which is not personal in nature. We strongly recommend you to consult a SEBI Registered Investment Adviser before taking any financial step ahead. We do not own a SEBI license as on date. The tax laws are subject to change. Please consult a practicing CA before taking any tax saving hack referred to in this article.