Capital gain bonds are financial instruments issued by certain government entities to provide tax-saving opportunities to investors. These bonds offer tax exemptions on long-term capital gains from selling assets like real estate, provided the gains are invested in these specified bonds. The lock-in period for such investments is usually five years.

Capital gains tax exemption bonds are also known as 54EC bonds and are available to investors who earned long-term capital gains from sale of land or building or both and would like tax exemption on these gains. 54EC bonds are AAA rated bonds and are backed by the government; hence, the risk of interest and capital payment is protected.