Capital Gain Bonds
Buying Mutual Fund instead of buying Capital Gain Bonds
In case of Sales of property Long Term Capital Gain (LTCG) arising from sale of property, investors generally invest in long term bonds where invested is locked in for 5 years and rate of interest is as low as 5.%. We recommend investors to invest in mutual fund, investment working is as under
Following working is an illustration of returns-
Comparision between (54EC) Bond and Mutual Fund
(Balance sum after tax)
A. Return in Long Term Capital Gain Bonds
| Investment Amount | 50,00,000 | |
| Interest @ 5% p.a (for five years) | 12,50,000 | |
| Tax @ 30% on Interest | 3,75,000 | |
| Net Earning (after 5 years) | 8,75,000 | |
| Investment Value (after 5 years) | 58,75,000 |
B. Investing in Mutual Fund after paying long term capital gain @ 20%
| I. HDFC Top 100 Fund | Total Returns |
|---|---|
| Investment made | 20,00,000 |
| Future Valuation @ 14% | 30,50,829 |
| II. ICICI Prudential Multicap Fund | Total Returns | |
|---|---|---|
| Investment made | 20,00,000 | 40,00,000 |
| Future Valuation @ 14% | 30,50,829 | 77,01,658 |
| Mutual Fund Return | 77,01,658 |
| Less Income Tax 10% ((7701658-4000000)-100000)* 10% |
3,60,166 |
| Net Return | 73,41,492 |
| Return From LTCG Bc | 58,75,000 |
| Net Gain | 14,66,492 |
Advantages of Mutual Fund Over Capital Gain Bond:
- No Lock-in Period
- Better Return
- Better Tax Benefits
