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D. Murali

SECTION 193 of the Income-Tax Act is about "interest on securities". According to the Section, the person responsible for paying any income by way of interest on securities should, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax at the rates in force on the amount of the interest payable. However, no tax need be deducted in certain cases, such as National Defence Bonds, National Defence Loan, National Savings Certificates (IV Issue) and so on.

As per Section 193 (iib) any interest payable on such debentures, issued by any institution or authority, or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf is also treated likewise and so no tax deducted therefrom.

A recent communiqué from the CBDT has now included "REC 54 EC Capital Gains Tax Exemption Bonds" issued by Rural Electrification Corporation Ltd, New Delhi for the purposes of the Section 193 (iib).

To recapitulate, Section 54EC of the Income-Tax Act provides relief from capital gains if the assessee makes investment in certain bonds. Where the capital gain arises from the transfer of a long-term capital 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 beneficially.

The new notification informs that the benefit for REC bonds would be admissible for the purpose of Section 193 (iib) also in the case of `transfer' of such bonds by endorsement or delivery. But in such cases, the transferee has to inform Rural Electrification Corporation Ltd by registered post within a period of 60 days of such transfer. (Notification No 359/2002 dated December 2, 2002)

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