Encashment of rec bonds u/s 54ec

[satbir singhwahi]

whether investment in rec bonds u/s54ec can be encashed on death of the holder by legal heirs before maturity.

[Mukesh Kumar]

The reading of section 54EC(2) is plain and unambiguous as in my view that in case of encashment of bond before three years invested u/s 54EC is taxable under section 45. Moreover it would be taxable in the year in which condition is violated. Therefore, since it is taxable in the year of encashment, the legal heirs would be liable to pay tax.

AI Summary

Legal heirs encashing REC bonds before maturity face tax implications under Section 54EC(2) and must pay tax per Section 45. A forum participant inquired about the tax implications of encashing REC bonds under Section 54EC upon the holder's death, questioning if legal heirs could do so before maturity. The response clarified that according to Section 54EC(2), if these bonds are encashed before three years, the amount becomes taxable under Section 45 in the year the condition is violated. Consequently, legal heirs would be responsible for paying the tax in the year of encashment.