If I invest the long term cap gain under sec54, do I have to pay tax & on what amount after the bonds mature?

I want to sell my house and invest the long term capital gains in tax saving bonds under section 54. After these bonds mature, on what amount do I have to pay tax?

4 Replies to “If I invest the long term cap gain under sec54, do I have to pay tax & on what amount after the bonds mature?”

  1. The full amount. But, why would you want to do this! The only real investment advantage is that you could purchase the bonds in a margin account and create SMA to borrow against.

    Why not purchase foreign bonds in the form of a UIT. Western EU countries, Australia, etc. At least your measly coupon rate won’t be completely er roded by the declining dollar. You will have more purchasing power when you are done, plus you will have reasonable liquidity, plus, if in a margin account – the ability to borrow against it in the form of a non-specific brokerage loan.

  2. At the maturity of these bonds u have to pay tax on interest only. the amount is exempt from tax if you keep the amount in bank for the notified period under section 54.
    As some one else has said u dont have to pay the tax on full amount. only on interest.

  3. Mr. Ikki is right to some extant. Regarding interest on the Tax savings bonds, you will be either getting interest every year or the interest may be accumulated to your account. In any case, you have to show the interest on your bonds as your income for that particular year and you have to pay tax on interest. At the time of maturity, there will not be any special tax except on the interest received in the year of maturity.

    I am 63 years old. I advise you not to sell the house at all. Every year the rates are going up and up. By the time you receive the Tax savings bonds maturity amount, your house value will be 2 to 4 times more than the bonds amount. Remaining left to you.

  4. you do not have to pay tax on bond’s value if you keep them with you till specified time ( 3 yrs at present) but interest is taxable every year. However, i agree with Mr reddy that it is not advisable to sell the house and keep the money locked in capital gain bonds. The interest rate on the bonds is not good . You should sell the house only if you need money immediately, and in that case , you should pay the tax on capital gain and use the remaining funds

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