Tax provisions and other features of NHAI bonds with Benefits under Section 54EC (2024)

NUMBER OF BONDS

The application must be made for a minimum of 1 (one) Bond, The application can be made for maximum 500 Bonds.

TERMS AND MODE OF PAYMENT

The full face value of Rs. 10,000/- (Rupees ten thousand only) per Bond is payable alongwith the Application. The application money is required to be paid by way of “account payee” demand draft / cheque drawn in favour of “National Highways Authority of India.”

FORM AND DENOMINATION

NHAI will issue one consolidated Letter of Allotment/Bond Certificate for the Bonds allotted to the subscribers. However, in case the Demat mode option is specified in the Application, a Letter of Allotment will be issued to the Subscriber and the Bonds will be credited in the account of the subscriber. In respect of consolidated Bond Certificates, the Authority will at the request of Bondholder, split such Bond Certificate into smaller denominations subject to a minimum of one Bond. The request for splitting should be accompanied by surrender of the original Bond Certificates, which would be treated as cancelled by the Authority.

INTEREST ON APPLICATION MONEY

NHAI shall pay interest (rounded off to the nearest rupee) on application money at the prevailing Coupon Rate as applicable for the Bonds on an annualized basis from the date of realization of cheque/demand draft in the designated account of NHAI in New Delhi till one day before Deemed Date of Allotment. The same shall be paid to the subscriber alongwith the first annual interest payment falling due after the Deemed Date of Allotment.

REFUND

In case of rejection of the Application on account of any technical grounds, refund without interest will be made. PAYMENT PROCEDURE

a) PAYMENT OF INTEREST

The interest on the Bonds will be payable for the period from the Deemed Date of Allotment till the last day of the financial year i.e. 31st March on the first bank working day of the next financial year.

The interest payment on the Bonds shall be made in the name of First Applicant (in case of Joint Application) / Sole Applicant and as per Bank account particulars provided in the Application, to the registered Bondholder(s) recorded in the books of the Authority/Registrar on the record date i.e., 30 days prior to the respective interest payment date. The interest payment for the first and last year or part thereof ending with the date of redemption shall be proportionate (on a 365 day a year basis) and all interest on Bond(s) will cease on the date of redemption. A year for this purpose would always be considered on a 365 (three hundred and sixty five) days basis.

MODE OF INTEREST PAYMENT

Interest payment will be made by cheques payable at par at such places as NHAI may deem fit. Efforts will be made to cover all cities where collection centers are appointed. Cheque(s) clearing charges, if any, will have to be borne by the Bondholders. In case, the cheques(s) payable at par facility is not available, NHAI reserves the right to adopt any suitable mode of payment.

b) PAYMENT OF PRINCIPAL

On Maturity, the Bonds shall be fully redeemed at par. The payment of redemption proceeds shall be made in the name of First Applicant (in case of Joint Application) / Sole Applicant and as per Bank account particulars provided in the Application. However, if the due date of redemption is a holiday / Sunday the Bonds will be redeemed on the next business day.

PAYMENT ON REDEMPTION

For bond(s) held in physical Form: The Bonds will be automatically redeemed by NHAI on maturity, without the surrender of Bond Certificate(s) by the Bondholder(s), on the expiry of 3 years from the deemed date of allotment and the redemption proceeds would be paid by cheque or NECS/ECS to the Bondholder whose name appear in the Register of Bondholders maintained by the Registrar. In case of transmission applications pending on the record date, the redemption proceeds will be issued to the legal heirs after the confirmation of the adequacy and correctness of the documentation submitted with such application. Till such time, the redemption proceeds will be kept in abeyance.

The Bonds would stand extinguished from the redemption date.

The payment will be made in the name of Bondholder registered as Bondholders as on the record date fixed by the Authority for this purpose i.e. 30 days prior to the respective redemption date. (The payment of redemption proceeds shall be made in the name of First Applicant (in case of Joint Application)/Sole Applicant and as per Bank account particulars provided in the Application).

For Bond(s) held in Demat Form: On the redemption date, redemption proceeds would be paid by Cheque(s)/ Redemption Warrant(s) etc., to those Bondholders whose names appear on the list of beneficial owners given by the Depository to the Authority. These names would be as per the depository’s record on the record Date / book closure date fixed for the purpose of redemption. These Bonds will be simultaneously extinguished. It may be noted that in the entire process mentioned above, no action is required on the part of the Bondholders.

TAXATION

TAX DEDUCTION AT SOURCE

The Ministry of Finance, Department of Revenue, Government of India, has, by notification in the official Gazette on 5th March, 2004 (notification No. 67/2004/F.No. 275/5/2004-IT (B) announced exemption from TDS provisions as follows.

“In exercise of the power conferred by clause (ii) (b) of the proviso to Section 193 of the Income Tax Act, 1961 (43 of 1961), the Central Government hereby specifies the “N HAI Non-convertible Redeemable Bonds with benefits under Section 54 EC of the Income Tax Act, 1961″ issued by National Highways Authority of India, New Delhi for the purpose of the said clause.

Provided that the benefit under the said clause shall be admissible in the case of transfer of such Bonds by endorsem*nt or delivery, only if the transferee informs National Highways Authority of India, New Delhi by registered post within a period of 60 days of such transfer”.

TAX BENEFITS UNDER SECTION 54 EC OF THE INCOME TAX ACT 1961

Section 54 EC relating to exemption on long term capital gains if invested in Bonds was inserted by the Finance Act 2000 effective for the assessment year 2001-2002 and subsequent years from 1st April, 2001. The section as effective for the assessment year 2008-09 and subsequent years from 1st April, 2007 reads as follows:

CAPITAL GAIN NOT TO BE CHARGED ON INVESTMENT IN CERTAIN BONDS

1) Where the capital gain arises from the transfer of a long term capital asset, (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say.

a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;

b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45.

(Provided that the investment made on or after the 1st day of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed fifty lakhs rupees.

2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long- term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money.

EXPLANATION – In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such

specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken.

3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a)
or clause (b) of sub-section (1),

a) A deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;

b) A deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.

EXPLANATION – For the purpose of this section,

(a) “Cost”, in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset;

(b) Long-term specified asset for making any investment under this section during the period commencing from the 1st day of April, 2006 and ending with the 31st day of March, 2007 means any Bond redeemable after three years and issued on or after 1st day of April, 2006 but on or before the 31st day of March, 2007,

(I) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or

(ii) by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), and notified by the Central Government in the Official Gazette for the purpose of this section with such conditions (including the condition for providing a limit on the amount of investment by an assessee in such Bond) as it thinks fit