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How to read section numbers: s.80C→s.123 means Section 80C of the Income-tax Act, 1961 is now Section 123 of the Income-tax Act, 2025 (in force from 1 April 2026). Returns for FY 2025-26 still use the old numbers; Tax Year 2026-27 onwards uses the new ones. Section Finder
Rules that matter
- Investment must be made within 6 months of the transfer date — the ITR due date does not extend it
- Maximum ₹50 lakh in total, even if the 6 months straddle two financial years
- Lock-in of 5 years; pledging the bonds as loan security counts as encashment
- Interest is taxable every year; no TDS is a reason to declare it, not to skip it
54 vs 54EC
| Section 54 | Section 54EC | |
|---|---|---|
| Asset sold | Residential house | Any land or building |
| Invest in | New house | Specified bonds |
| Cap | ₹10 crore | ₹50 lakh |
| Time | 1 yr before – 3 yrs after | 6 months after |
Worked example
Example
Example: A plot sold for ₹90 lakh gives LTCG of ₹45 lakh. Investing ₹45 lakh in REC bonds within 6 months makes the entire gain exempt.
Common mistakes
- Investing after 6 months
- Investing more than ₹50 lakh expecting more exemption
- Using it for short-term gains
Frequently asked questions
No — only long-term gain on land or building.
No. Interest is taxable at your slab rate.
Last reviewed on 11 November 2026 by Vinay Jaglan, VJ & Associates. Law and portal screens change — verify before acting, or ask the office.
