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morePursuant to the provisions of Section 54EC of the Income-tax Act, 1961, any capital gains arising from the transfer of a long-term capital asset (being land, building or both) shall be exempt from taxation to the extent such gains are invested, within a period of six months from the date of such transfer, in ‘long term specified asset’ in the nature of bonds notified by the Central Government for this purpose. Such bonds, which are ordinarily issued by entities backed by the Government, must be held for a minimum period of five years and are classified as ‘long-term specified assets’ under the said provision. The maximum amount eligible for exemption under this section shall not exceed Rs. 50 lakhs in a financial year.
The Central Government, vide Notification No. 31/2025 dated April 8, 2025 [S.O. 1644(E)], has notified that bonds issued by the Housing and Urban Development Corporation Limited (HUDCO) on or after April 1, 2025, and redeemable after five years, shall be treated as ‘long-term specified asset’ under clause (ba) of the Explanation to section 54EC of the Income-tax Act, 1961.
This notification enables taxpayers to claim exemption from capital gains tax by investing in eligible HUDCO bonds under the provisions of section 54EC, subject to prescribed conditions.
As per the notification:
- HUDCO must utilise the proceeds from such bond issuances strictly for infrastructure projects capable of servicing their debts from project-generated revenues, without reliance on State Government support.
The term ‘infrastructure’ shall be interpreted as per the updated Harmonised Master List of Infrastructure sub-sectors issued by the Department of Economic Affairs (Notification No. 262 dated October 11, 2022), including any future amendments.
This is a welcome move, especially in light of the discontinuation of NHAI bonds as a specified asset under section 54EC with effect from 31st March 2023, as it continues to provide taxpayers with an avenue for claiming capital gains exemption through investment in notified infrastructure bonds.
We trust you find the same useful.