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Rural Electrification Corporation Limited (REC) bonds are among the most trusted government-backed fixed-income instruments in India. Investors prefer REC bonds for their competitive interest rates and potential capital gains tax advantages. This page lists current REC bond issues, interest rate details, and everything you need to share your interest and request for a quote.
What Are REC Bonds?
REC Bonds are one of the Section 54EC Capital Gain Bonds, issued by REC Limited, a government-backed, Maharatna PSU under the Ministry of Power. These bonds are primarily used for the reinvestment of long-term capital gains to claim tax exemption under Section 54EC of the Income Tax Act.
Key Features:
AAA-rated, backed by the Government of India
Lock-in period: 5 years, non-transferable
Interest: ~5%-5.25% p.a., paid annually
Investment range: Minimum ₹10,000; maximum ₹50 lakh in a financial year
How Do REC Bonds Work?
REC Bonds qualify for tax exemption under Section 54EC of the Income Tax Act. If you have earned long-term capital gains (LTCG) from the sale of assets like property, you can reinvest the proceeds in REC Bonds within six months to claim tax exemption up to a limit of ₹50 lakh.
Benefits of Investing in REC Bonds
Tax Savings: Full exemption on LTCG reinvested up to ₹50 lakh
High Safety: AAA-rated and backed by the Government of India
Steady Returns: Fixed annual interest in the range of 5%-5.25%
Key Considerations & Limitations
Lock-in Period: Mandatory 5-year holding; no premature redemption allowed
Non-transferable: Cannot be traded or sold in the secondary market
Tax on Interest: Interest income is taxable as per your income slab, with no TDS benefit
Complete LTCG Exemption: After 5 years lock-in period, the principal amount regained is exempt from tax
Who Should Invest in REC Bonds?
Best suited for:
Investors with long-term capital gains seeking tax-efficient reinvestment option
Those preferring safe, government-backed fixed-income instruments
Not ideal for:
Investors needing high liquidity or short-term gains
Those seeking returns significantly above ~5% p.a.
FAQs on REC Bonds
REC Bonds are Section 54EC Capital Gain Bonds issued by REC Limited, a government-backed Maharatna PSU under the Ministry of Power. They allow investors to reinvest long-term capital gains and claim tax exemption.
If you have long-term capital gains from selling assets such as property, you can invest up to ₹50 lakh in REC Bonds within six months of the sale to claim full exemption under Section 54EC of the Income Tax Act.
REC Bonds have a mandatory lock-in period of 5 years. You cannot redeem or sell them before the completion of this period.
No, REC Bonds are non-transferable and cannot be traded or sold in the secondary market due to their tax-exemption nature.
REC Bonds generally offer fixed interest rates of around 5% to 5.25% per annum, which is paid annually.
Any Indian resident, including individuals, Hindu Undivided Families (HUFs), and certain institutions, can invest in REC Bonds, provided they have eligible long-term capital gains.
Yes, the annual interest earned on REC Bonds is fully taxable as per the investor's income tax slab.
