New Delhi: In a significant policy move to strengthen green energy financing in India, the Central Board of Direct Taxes (CBDT), under the Ministry of Finance, has notified that bonds issued by the Indian Renewable Energy Development Agency Ltd. (IREDA) will be considered “long-term specified assets” under Section 54EC of the Income Tax Act, 1961.
The notification, which comes into effect from July 9, 2025, allows investors to claim capital gains tax exemption by investing in these IREDA-issued bonds, provided the investment is made on or after the notification date. The bonds are redeemable after five years, aligning with the stipulations of the tax benefit under Section 54EC.
Read Also: IREDA Board to Approve Q1FY26 Results on July 10; Trading Window Remains Closed
Tax Benefits for Investors
Under Section 54EC, taxpayers can save Long Term Capital Gains (LTCG) tax up to ₹50 lakh in a financial year by investing in these specified bonds. This offers a dual benefit of tax savings and contributing to India’s clean energy transition. The tax exemption provides an attractive alternative for individuals looking to reduce their capital gains tax liability through safe, government-backed instruments.
IREDA to Utilise Bond Proceeds for Renewable Energy Projects
According to the CBDT notification, the proceeds from these tax-exempt bonds will be used exclusively to finance renewable energy projects that are capable of servicing their own debt through project revenues, independent of state government support. This ensures financial discipline and risk mitigation while encouraging private investment in clean energy.
IREDA CMD Welcomes the Decision
Commenting on the development, Mr. Pradip Kumar Das, Chairman and Managing Director of IREDA, said:
“We are deeply grateful to the Ministry of Finance, Ministry of New & Renewable Energy, and the CBDT for this landmark policy support. This recognition by the Government reinforces IREDA’s pivotal role in accelerating renewable energy financing in the country.“
He added that the tax-exempt status for IREDA bonds will not only make them an attractive investment avenue but also enable access to lower-cost funds. This is expected to boost the pace of green energy deployment, directly contributing to India’s target of achieving 500 GW of non-fossil fuel capacity by 2030.
Implications for the Renewable Energy Sector
This move marks a substantial boost for India’s renewable energy sector by:
- Attracting more retail and institutional investors seeking tax-saving instruments.
- Lowering the cost of capital for IREDA.
- Supporting the government’s ambitious climate goals and energy transition.
About IREDA
IREDA, a government-owned non-banking financial institution under the Ministry of New and Renewable Energy, is dedicated to promoting and financing renewable energy and energy efficiency projects across India. Formed in 1987, IREDA is a Navratna organisation owned by the Government of India and administratively controlled by the Ministry of New and Renewable Energy (MNRE).
