Should you buy bonds to save capital gains?
The lock-in period of section 54EC tax-saving bonds has increased from 3 years to 5 years. Should you still prefer them over other investments that give better returns?
In the Union Budget 2018, the finance minister proposed to increase the lock-in period of investments in capital gain tax exemption bonds (under section 54EC of the Income Tax Act, 1961) to 5 years. In the Union Budget 2017, the government had said it would introduce more financial instruments to save tax on capital gains. However, instead of new products, the present lock-in period of 3 years for 54EC bonds has been proposed to increase to 5 years. Given that the lock-in period or tenure of an investment plays an important role in deciding whether it makes sense to invest in or not, let’s look at whether a longer lock-in period could deter investors from investing in these bonds to save taxes. Also, if one does not invest in them, what are the other options for planning your capital gains?