CBDT Notifies IREDA Bonds as Eligible for Section 54EC Exemption

The Central Board of Direct Taxes (CBDT) has officially notified the Indian Renewable Energy Development Agency (IREDA) as a long-term specified asset for the purposes of Section 54EC of the Income-tax Act, 1961. This move provides taxpayers with an additional path for capital gains exemption under the said section.

Tax Saving Potential for Investor

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 avoid paying LTCG tax, while contributing to renewable energy development.

1. Eligibility Criteria for IREDA Bonds under Section 54EC

As per the notification, the following conditions must be fulfilled for IREDA bonds to qualify as long-term specified assets:

·         The bonds must be issued by IREDA.

·         They must be redeemable after five years.

·         The bonds must be issued on or after 09-07-2025.

2. Use of Proceeds – Restricted to Self-Sustaining Renewable Projects

 The utilisation of proceeds from the bond issuance. The CBDT has mandated that:

·         The funds raised through these bonds must be used by IREDA only for renewable energy projects.

·         Such projects should be capable of servicing the debt from their own revenues.

·         These projects must not rely on any financial assistance or guarantees from State Governments for debt servicing.

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. The tax-exempt status for our bonds will offer an attractive investment path while ensuring increased capital availability for green energy projects.

3. Implications for Taxpayers

Investors who earn capital gains and wish to claim exemption under Section 54EC can now consider IREDA bonds (issued post 09-07-2025) as an eligible investment. By doing so, they can avoid their tax liability while supporting the development of sustainable energy infrastructure in India.