Section 54EC Tax Relief: Can You Claim Exemption Twice by Investing Again in Capital Gains Bonds?

Under the Income Tax Act, Section 54EC offers a significant tax-saving opportunity to individuals who earn long-term capital gains from selling land or buildings. The provision allows taxpayers to claim exemption by investing the capital gains amount in specified Capital Gains Bonds issued by government-backed financial institutions. But a common question often arises—can you invest twice and claim the exemption again within the same timeframe?

A recent query from Mohan Saxena of Ghaziabad has brought this question into focus. He shared that he already invested ₹50 lakh in Capital Gains Bonds earlier this year. Now he wants to know whether he can invest an additional ₹50 lakh before March 31, 2026, and claim another exemption under Section 54EC. Moneycontrol consulted tax expert and Chartered Accountant Balwant Jain to explain the rules in detail.

Understanding Section 54EC of the Income Tax Act

Section 54EC permits taxpayers to save long-term capital gains tax if the gains arise from the sale of immovable property—specifically land or buildings. To claim this exemption, the amount of long-term capital gain must be invested in notified Capital Gains Bonds within six months from the date of sale.

These bonds are issued by select government-backed institutions. Currently, the following entities are authorized to issue Capital Gains Bonds:

• REC

• NHAI

• PFC

• RFC

• HUDCO

• IREDA

These bonds typically have a lock-in period of five years, making them a long-term and relatively safe investment option for those wishing to reduce tax liability.

Can You Invest Twice Under Section 54EC?

According to tax expert Balwant Jain, Section 54EC does allow investment in these bonds for claiming capital gains exemption—but with strict limits.

Two Key Conditions Apply:

1. Maximum Investment Limit of ₹50 Lakh per Financial Year

Section 54EC explicitly restricts investment to ₹50 lakh in a financial year. This is the upper ceiling for claiming exemption through Capital Gains Bonds.

2. Investment Cannot Exceed ₹50 Lakh for the Same Financial Year

Even if a taxpayer has additional capital gains or wishes to invest more, the law does not permit exceeding this annual limit. This restriction applies even if the taxpayer sells multiple assets or earns multiple capital gains during the year.

In Mohan Saxena’s case, he has already invested ₹50 lakh in these bonds during the current financial year. This means he has already exhausted the limit, and therefore, he cannot invest another ₹50 lakh in the same financial year to claim another exemption under Section 54EC.

Why the Limit Matters

The ₹50 lakh ceiling was introduced to prevent misuse of the exemption and to standardize tax benefits. By capping the maximum exemption annually, the Income Tax Act ensures that the benefit remains reasonable and targeted.

This also means that the timing of your property sale, the financial year in which it falls, and the six-month investment window all become crucial for effective tax planning.

For example:

• If a property is sold in February, the six-month window may spill over into the next financial year.

• In such cases, a portion of the capital gains may be invested in one year and the remaining in the next year—allowing exemption up to ₹50 lakh in each financial year.
  This scenario, however, depends entirely on the dates aligning across two financial years.

Key Takeaways for Taxpayers

• Section 54EC allows exemption on long-term capital gains by investing in specified bonds.

• Investment must be made within six months of selling the property.

• ₹50 lakh per financial year is the maximum limit for claiming exemption under this section.

• You cannot claim an additional exemption by investing more than ₹50 lakh within the same financial year.

• Strategic planning around sale dates can help optimize tax benefits.