The Central Government, in a significant move aimed at supporting long-term infrastructure financing, has notified the Ten-Year Zero-Coupon Bond of the National Bank for Financing Infrastructure and Development (NaBFID) as a Zero-Coupon Bond under the provisions of the Income-tax Act, 2025.
The notification, issued by the Central Board of Direct Taxes (CBDT) through Notification No. 89/2026 dated July 17, 2026, has been made under Section 2(112) of the Income-tax Act, 2025 read with relevant provisions of the Income-tax Rules, 2026.
What is a Zero Coupon Bond?
A Zero Coupon Bond is a debt instrument that does not pay periodic interest during its tenure. Instead, it is issued at a discount and redeemed at face value upon maturity. The investor's return is the difference between the issue price and the redemption value.
Such instruments are commonly used for long-term financing requirements and are particularly suitable for infrastructure projects that require substantial upfront funding.
Key Features of the Notified Bond
As per the notification, the bond will have the following characteristics:
- Name of Bond: Ten-Year Zero-Coupon Bond of the National Bank for Financing Infrastructure and Development (NaBFID)
- Tenure: 10 years
- Issue Deadline: On or before March 31, 2028
- Redemption Amount: ₹20,000 crore
- Discount Amount: ₹10,296.12 crore
- Number of Bonds: 20 lakh
The notification formally recognizes the instrument as a Zero Coupon Bond for tax purposes under the Income-tax Act, 2025.
Why This Matters
NaBFID was established to strengthen infrastructure financing in India by providing long-term capital for critical sectors such as transportation, energy, logistics, and urban development. The recognition of its 10-year Zero Coupon Bond under the Income-tax framework provides clarity on its tax treatment and facilitates fund mobilization from investors.
The move is expected to support infrastructure development by enabling NaBFID to raise large-scale, long-term resources through a structured financing instrument.
Effective Conditions
The CBDT has clarified that the notification will remain effective subject to NaBFID complying with the conditions prescribed under the Income-tax Act, 2025 and the Income-tax Rules, 2026.
Conclusion
The notification of NaBFID's Ten-Year Zero-Coupon Bond marks another step in strengthening India's infrastructure financing ecosystem. By granting statutory recognition under the Income-tax Act, 2025, the Government has provided certainty regarding the bond's tax status, which could enhance investor confidence and support long-term infrastructure funding initiatives across the country.
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