IREDA bonds get tax-exempt status, helping investors save on capital gains

Exemption to IREDA bonds redeemable after five years and issued on or after July 9

Don't want to miss the best from Business Standard?

Bonds issued by the Indian Renewable Energy Development Agency Ltd (IREDA) will be regarded as “long-term specified assets” to allow individual investors to claim tax exemption on capital gains.

 

Exemption under Section 54EC of the Income Tax Act applies to IREDA bonds redeemable after five years and issued on or after July 9 this year, according to a notification issued by the Central Board of Direct Taxes.

 

Tax-saving potential for investors

 

Under Section 54EC, individuals earning long-term capital gains (LTCG) can save tax by investing the gains in specified bonds within six months of the asset sale. The maximum investment limit is Rs 50 lakh in a financial year.

 

This notification means that IREDA bonds now join the list of other tax-saving bonds eligible under Section 54EC. For investors, this presents another option to defer or avoid paying LTCG tax, while contributing to renewable energy development.

 

Boost for renewable energy projects

 

According to IREDA, proceeds from the bonds will be deployed exclusively for renewable energy projects that can service their debt independently, without relying on state governments.

 

“This recognition by the government reinforces IREDA’s pivotal role in accelerating renewable energy financing in the country,” said Pradip Kumar Das, chairman and managing director, IREDA.

 

“The tax-exempt status for our bonds will offer an attractive investment avenue while ensuring increased capital availability for green energy projects, contributing to India’s 500 GW non-fossil fuel capacity target by 2030,” he said.

 

This move is expected to attract wider participation from investors seeking safe, tax-saving instruments. For those planning to reinvest long-term capital gains, IREDA bonds now provide an opportunity to save tax while backing India’s transition to clean energy.

 

Financial planners, however, advise investors to assess their liquidity needs before committing to these bonds that come with a lock-in period of five years.