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NameIssue SizeMaturityCoupon
Rural Electrification Corporation LimitedCRISIL AAAINE020B07IZ51955.00Cr25 Aug 20249.34 %
Rural Electrification Corporation LimitedCRISIL AAAINE020B08724100.00Cr15 Feb 20279.15 %
Rural Electrification Corporation LimitedCRISIL AAAINE020B08732100.00Cr15 Feb 20279.15 %
REC LimitedCRISIL AAAINE020B08BP92151.20Cr28 Mar 20298.97 %
REC LimitedCRISIL AAAINE020B08BQ71600.70Cr16 Apr 20298.85 %
Rural Electrification Corporation LimitedCRISIL AAAINE020B088314300.00Cr12 Apr 20238.82 %
REC LimitedCRISIL AAAINE020B08BS31097.00Cr14 May 20298.80 %
REC LimitedCRISIL AAAINE020B08BJ22027.00Cr22 Jan 20298.80 %
Rural Electrification Corporation LimitedCRISIL AAAINE020B084431800.00Cr12 Jul 20258.75 %
Rural Electrification Corporation LimitedCRISIL AAAINE020B084271250.00Cr08 Jun 20258.75 %

Who Issues REC Bonds?

REC Bonds are issued by REC Limited, a Public Sector Undertaking (PSU) under the Ministry of Power. It is one of India's leading infrastructure finance companies, with a net worth of ₹58,121 crores (as of March 31, 2022). The main objective of REC is to finance and promote rural electrification, transmission, distribution and generation, including renewable energy projects all over India. It provides financial assistance to State Electricity Boards, State Government Departments, central/state power utilities, independent power producers, rural electric cooperatives, and private sector utilities through its extensive nationwide network of 22 state offices.

How do REC Bonds Work?

REC bonds are section 54EC bonds for investors earning long-term capital gains from selling their immovable property or shares. An investor can claim tax exemption under section 54EC of the Income Tax Act of 1961.

What are the features of REC Bonds?

Money to be invested
Only long-term capital gains arising from the transfer of long-term capital assets being immovable property within 6 months of the transfer can be invested in these Bonds.

Rate of interest
REC bonds provide an interest of 5.25% per annum as on April 1, 2023, which will be paid every year on June 30 until redemption, and the company will pay the balance interest along with redemption.

Minimum investment
An investor needs to make a minimum investment of ₹10,000. This means they have to buy at least one bond.

Maximum investment
An investor can buy a maximum of 500 bonds of ₹10,000 each, i.e., in a financial year, they invest up to ₹50 lakhs.

Listing in the stock exchange
REC Bonds are non-transferable and cannot be listed on any stock exchange.

Credit rating
REC Bonds have received an “AAA” credit rating from CRISIL and ICRA Limited.

An investor needs to hold the investment in REC bond for at least five years from the deemed date of allotment to avail of the benefit under Section 54EC of the Income Tax Act of 1961.

REC bonds are non-transferable and non-negotiable.

Refund/withdrawal of application money
Once credited to the REC 54EC Collection Account, the amount can’t be refunded. However, in case of rejection of the Application on account of technical grounds, at REC’s sole discretion, a refund without interest will be made.

Record date
The record date of interest shall be 15 days before each coupon payment date and 15 days before the redemption date. The company will pay the interest to the person whose name appears in the Register of Bondholders on the record date.

Advantages of REC Bonds

  • An investor can claim exemption on long-term capital gains from immovable property.
  • This holds if you invest in Bonds under Section 54EC within 6 months of transfer.
  • REC Bond has received the highest credit from CRISIL and ICRA, which indicates the stability in the repayment of principal & interest thereon.
  • Even though interest earned from REC bonds is taxable, no TDS is deducted from the interest.
  • The Government of India backs REC bonds, as REC is a public sector entity. Therefore, the risk associated with the REC limited bonds is very less.

Disadvantages of REC Bonds

  • As the bonds are non-transferable, these instruments aren’t marketable.
  • Premature bond redemption is not permitted under any circumstances apart from death.

How to Calculate the Yield of REC Bonds?

Bond yield refers to the returns an investor will earn on investing in a particular bond, and the calculation involves two variables: annual coupon payment and current bond price.

Here is the bond yield formula:
As REC bonds are not marketable, the yield of the bond is equal to the annual coupon rate.
For instance, for a REC bond with a face value of ₹10,000 and an annual coupon of 5.25%, the annual coupon payment would be ₹525 (). The bond yield would be 5.25% ().

Who Should Invest in REC Bonds?

Only individuals, Hindu undivided families (HUFs), approved institutions and NRIs are eligible to invest in REC’s 54EC Capital Gain Bonds, considering all the conditions are met. Any investor who has earned long-term capital gain from an immovable property can invest in REC bonds to claim an exemption under section 54EC within six months from the day they earned the long-term capital gain.

FAQs about REC Bonds

Are TDS deducted on income earned from REC bonds?

No, TDS isn’t deductible on income earned by Resident Indians.However, TDS will be deducted for Non-Resident Individuals.

Are REC bonds backed by any security?

The Bonds would be secured by way of mortgage and/or hypothecation of immovable and/or movable properties of the Issuer as agreed between the Bond Trustee and the Issuer.

What is the procedure to claim unpaid principal/ interest of REC 54 EC Bonds?

All the Bondholders of REC 54EC capital gains tax exemption bonds who have not redeemed their bonds or have not received interest are requested to contact the Registrar to the issue or REC's Investor Cell. You can access the contact from here.

What if any investor fails to claim unpaid principal/ interest of REC 54 EC Bonds?

Any principal or interest amount lying unclaimed for 7 years would be transferred to Investor Education & Protection Fund as per the requirement of Section 125 of the Companies Act, 2013.
Disclaimer: The facts and information on this page are for information and awareness purposes only. No information provided here is intended towards any specific user and should not be construed as investment advice or a recommendation of any kind whatsoever. You are requested to consult with your professional investment advisor or tax advisor for specific directions on any investments in any securities including the bonds mentioned on this page before making any investment decision. Wint Wealth shall not be liable for any losses incurred by you based on an investment decision utilising the information on this page.