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IREDA Bonds Notified Under Sec54EC: New Path to Capital Gain Exemption
IREDA Bonds Notified Under Sec54EC: New Path to Capital Gain Exemption
In This Article
🧾 What the Notification States:
⚖️ Legal Backdrop: Section 54EC of the Income-tax Act, 1961:
🌱 Why This Matters:
Boost to Green Financing:
New Tax-Saving Avenue:
Long-Term Commitment:
💡 Key Points to Remember:
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Article Brief
Discover how IREDA bonds under Section 54EC offer a new way to save tax on capital gains through smart, government-backed investments.

In a significant move aimed at encouraging green investments and offering tax-saving opportunities, the Ministry of Finance (Department of Revenue), through the Central Board of Direct Taxes (CBDT), has issued a notification on July 9, 2025, designating IREDA bonds as ‘long-term specified assets’ under Section 54EC of the Income-tax Act, 1961.

🧾 What the Notification States:

The government has officially notified that:

  • “Bonds redeemable after five years and issued on or after the date of this notification by the Indian Renewable Energy Development Agency (IREDA) shall qualify as ‘long-term specified assets’ for the purposes of Section 54EC.”

⚖️ Legal Backdrop: Section 54EC of the Income-tax Act, 1961:

Section 54EC allows capital gains exemption if the gain from the transfer of a long-term capital asset from land or Building is invested within six months in specified bonds. 

Until now, common instruments qualifying under this section included bonds issued by:

  • Rural Electrification Corporation (REC)
  • National Highways Authority of India (NHAI)
  • Power Finance Corporation (PFC)
  • Indian Railway Finance Corporation (IRFC)

With this notification, IREDA bonds have now joined this list.

🌱 Why This Matters:

Boost to Green Financing:

IREDA, a premier public sector NBFC under the Ministry of New and Renewable Energy (MNRE), plays a crucial role in financing clean energy projects in India. Recognizing IREDA bonds under Section 54EC not only incentivizes investment but also supports India’s sustainability goals.

New Tax-Saving Avenue:

For taxpayers looking to reinvest capital gains and save tax, this adds a fresh instrument to diversify portfolios with an ESG (Environmental, Social, and Governance) focus.

Long-Term Commitment:

With a 5-year lock-in, these bonds encourage long-term capital stability for critical infrastructure and renewable projects.

💡 Key Points to Remember:

  • Effective Date: Bonds issued on or after July 9, 2025
  • Eligibility: Applies to capital gains exemption under Section 54EC.
  • Limit: The maximum investment eligible for exemption remains ₹50 lakhs.
  • Lock-in Period: 5 years (no early redemption allowed).

This development is a win-win for both taxpayers seeking exemptions and for the nation’s clean energy ambitions. Financial planners and tax professionals should now consider IREDA bonds as part of Section 54EC strategies, especially for clients interested in sustainable investing.

CAPITAL GAINS TAX
LONG TERM CAPITAL GAIN
CAPITAL GAINS
INCOME TAX ACT
SECTION
TAX COMPLIANCE
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Author

OP Yadav

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Tax Evangelist at Prosperr.io, (Ex - IRS, Former Principal Commissioner of Income Tax Department) with 31 years of experience in Income Tax Administration. Authored books Master Guide to Corporate Taxation and "" Transfer Pricing in India : Principles and Practice"".

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