The Central Board of Direct Taxes (CBDT) has officially notified a zero-coupon bond issued by the National Bank for Agriculture and Rural Development (NABARD) under clause (48) of Section 2 of the Income-tax Act, 1961.
As per Notification No. 56/2025 issued by the Ministry of Finance (Department of Revenue) on June 12, 2025, the following key details define the characteristics of the zero-coupon bond:
- Bond Name: Zero Coupon Bond of The National Bank for Agriculture and Rural Development (NABARD)
- Maturity Period: 10 years, 11 months, and 13 days
- Issue Timeline: On or before March 31, 2027
- Redemption Amount at Maturity: Rs 19,500 crore
- Discount on Issue: Rs 10,349.625 crore
- Total Number of Bonds: 19.50 lakh units
This notification has been issued in accordance with the powers vested in the Central Government under clause (48) of Section 2 of the Income-tax Act, read with Rule 8B(3)(ii), (iii), (v) and Rule 8B(6) of the Income-tax Rules, 1962.
Tax Implications
With this official recognition, the bond will now qualify as a 'zero-coupon bond' for income tax purposes, implying that the accrued discount (difference between the redemption amount and the issue price) will be taxable as income from capital gains, only on transfer or redemption, and not annually.
The recognition of NABARD's bond under this clause indicates the government's continued push to enhance rural infrastructure financing through tax-efficient instruments.
Strategic Significance
NABARD, as India's apex development finance institution for rural and agricultural development, is expected to use the proceeds of these bonds for long-term funding of rural credit, infrastructure projects, and other development initiatives.
This structured bond issuance offers an attractive opportunity for institutional investors seeking long-term, tax-efficient investments, particularly given the size and backing of the issuer.
Official copy of the notification is as follows
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