How Paying Capital Gains Tax Led to Higher Wealth Creation
After selling a residential property in Pune, a client realized long-term capital gains of ₹60 lakhs. Initially, the investor intended to invest ₹50 lakhs in Capital Gains Bonds under Section 54EC to save tax. However, after evaluating return potential, inflation impact, and liquidity, Acumenn Money Pvt Ltd guided the client through an alternate strategy — paying the applicable capital gains tax and investing the balance in mutual funds instead.
This disciplined, research-backed decision led to significantly higher post-tax, inflation-adjusted wealth after 5 years.
Mode of Investment
PMS, Mutual Funds
Year
2006
Initial Investment
E-commerce
Monthly SIP
₹ 50,000
Goal Corpus
₹ 10 crores
Objective
To demonstrate that:
Merely saving tax may not always lead to higher long-term wealth.
Paying capital gains tax and investing the remaining proceeds into diversified mutual funds can deliver superior inflation-adjusted returns.
Liquidity, flexibility, and compounding are key to real wealth creation — even after taxes.
Key Insights
Tax-saving ≠ wealth creation: Paying tax but investing wisely can yield better long-term outcomes.
54EC Bonds provide stability but fail to beat inflation.
Mutual Funds combine liquidity, compounding, and inflation-beating growth — even after tax.
Long-term discipline and asset allocation matter more than tax deferral.
5.25%
54EC Bonds Interest Rate
12%
Mutual Funds NIFTY 50 Average 5 years CAGR
5 Years
Lockin period for 54EC Bonds
Process
Scenario 1 – Section 54EC Bonds
Investment: ₹50 lakhs (max allowable)
Tenure: 5 years (locked-in, no liquidity)
Coupon Rate: 5.25% (tax-free interest)
Maturity Value: ₹64.7 lakhs
Effective CAGR: 5.25%
Real Return (after inflation @ 7.5%): -2.25% per annum
Scenario 2 – Mutual Funds (Post-Tax Reinvestment)
Investment: ₹48 lakhs (after paying ₹12 lakhs LTCG tax)
Tenure: 5 years
Average Annual Return: 14% CAGR (diversified equity mutual funds)
Maturity Value: ₹92.7 lakhs
LTCG Tax on Mutual Funds: ~₹5.5 lakhs (12.5% on long-term gains > ₹1.25L)
Net Post-Tax Value: ₹87.2 lakhs
Effective CAGR (after taxes): ~12.6%
Real Return (after inflation @ 7.5%): +5.1% per annum
Comparison
“I almost went ahead with Capital Gains Bonds to save tax, but Acumenn Money showed me the bigger picture. Paying the tax upfront and investing smartly actually made me wealthier — and more confident about my decisions.”
Anonymous
Retired Professional | Pune
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