54ec long term capital gains tax exemption in case of death

export executive

An individual, Mr.X, sold a plot of vacant land and in order to claim exemption of long term capital gains tax, invested Rs.50 lakhs in 54EC tax saving bonds of NHAI and REC. The bonds have a lock-in period of 3 years. Within 3 years, the bonds cannot be transferred or converted or sold in order to claim the tax exemption.

Now, if Mr.X expires within one year of investing in the 3-year bonds, will the tax exemption still be available, provided the bonds are not transferred or converted or sold? Should the bonds continue to remain in the name of Mr.X for additional 2 years (even after death) to complete the 3-year lock-in period? Is this legally allowed?

Or, do the bonds have to be transferred/transmitted to the nominee of Mr.X (after his death) and the nominee does not transfer/convert/sell the bonds until the 3-year lock-in period is complete?

The worry is that transfer/transmission of the 3-year 54EC bonds to the nominee within one year may amount to not holding the bonds for the compulsory 3 years and hence capital gains tax will have to be paid.

Kindly advise what is the best course of action. Thanks. 




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