Capital bonds, also known as 54EC bonds, are debt instruments that give you a fixed return on your investment. If you sell a house property and earn capital gains thereon, you can enjoy tax exemption by investing in these bonds. When you invest in a capital bond, you get to earn interest at a fixed rate. The interest is calculated on the face value of the bond. And it is paid out at regular intervals. Once the bond matures, you will have to redeem the instrument.