NEW DELHI: The Central Government has given another chance to investors to save long-term capital gains tax arising out of sale of house and commercial property, by investing in Rural Electrification Corporation (REC) bonds.

Conceding the demand of investors, the Finance Ministry has allowed REC to issue additional tax-saving capital bonds worth Rs. 3,500 crore this fiscal. "To safeguard the interests of small investors, the government has put a ceiling of Rs. 50 lakh investment in these bonds," Central Board of Direct Taxes (CBDT) spokesperson, A. K. Sinha, told reporters here on Monday. The government was hopeful that these bonds would suffice for the investors to save long-term capital gains tax, considering the cap on investment. It might be a last chance to save long-term capital gains tax this fiscal, he said.

REC and National Highways Authority of India (NHAI) were earlier permitted in June to issue bonds for Rs, 4,500 crore and Rs. 1,500 crore, respectively, during 2006-07. Since these bonds were fully subscribed in August, investors demanded raising the limit of these bonds, which provide tax exemption on capital gains arising from the transfer of long-term capital assets such as sale of a house.

According to the notification issued on December 22, 2006, any person who will have to otherwise pay tax on the earned income, can save tax by investing in these bonds.

Investors, who have already invested more than Rs. 50 lakh in the bonds of REC and NHAI, are not eligible for the new bonds of REC.

The Budget for 2006-07 restricted tax rebate from the sale of long-term capital gains like house in bonds issued by REC and NHAI under Sec. 54 EC. — PTI

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