The Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (CBDT), has issued Notification No. 52/2025 dated May 30, 2025, formally recognizing the "Ten Year Zero Coupon Bond" issued by REC Ltd. as a zero coupon bond under Clause (48) of Section 2 of the Income-tax Act, 1961.
According to the notification published in the Gazette of India (S.O. 2447(E)), the following key details define the bond:
- Name of the Bond: Ten-Year Zero Coupon Bond of REC Ltd.
- Life of the Bond: Ten years and six months
- Issuance Deadline: On or before March 31, 2027
- Maturity Value: ₹5,000 crore
- Discount Amount: ₹2,200 crore
- Number of Bonds: 5 lakh
The notification was issued under the authority provided by Rule 8B of the Income-tax Rules, 1962, specifically referencing sub-rule (3)(ii), (iii), (v) and sub-rule (6). These rules govern the tax treatment and eligibility conditions for zero coupon bonds.
This classification of REC Ltd.'s bond as a zero coupon instrument ensures favorable capital gains tax treatment under the Income Tax Act. Investors in these bonds will not receive periodic interest, but rather, realize income in the form of capital appreciation upon maturity.
This move is expected to bolster long-term infrastructure financing and attract institutional investors to REC Ltd., a key public sector enterprise focused on power sector development.
Official copy of the notification is mentioned below
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