Capital Gains Relief: HUDCO Bonds Eligible under Section 54EC

Last updated: 10 April 2025

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Quick Summary

The Central Government has announced that Housing and Urban Development Corporation (HUDCO) bonds, redeemable after five years and issued on or after 1st April 2025, are now eligible for capital gains tax relief under Section 54EC of the Income-tax Act. This means investors can use these bonds to reduce their capital gains tax liability. HUDCO must ensure that the proceeds from these bonds are used exclusively for infrastructure projects that can be self-serviced through their revenues.

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 7th April, 2025

S.O. 1644(E).—In exercise of the powers conferred by clause (ba) of Explanation to section 54EC of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that bonds redeemable after five years and issued on or after 01st day of April, 2025, by the Housing and Urban Development Corporation Limited (HUDCO) (a public financial institution notified by the Central Government under section 2(72) of the Companies Act, 2013), as ‘long-term specified asset’ for the purposes of the said section.

2. HUDCO shall utilise the proceeds from such bonds only for those infrastructure projects which can service the debt out of the project revenues without being dependent on the State Governments for the service of debts.

Explanation: For the purpose of this notification,

(a) ‘Infrastructure’ includes all infrastructure sub-sectors as defined vide notification no. 262 of the Department of Economic Affairs, Ministry of Finance issued by F.No.13/1/2017-INF dated October 11, 2022 (Updated Harmonised Master List of Infrastructure sub-sectors) and shall include any amendments or additions made thereof;

(b) ‘Infrastructure project’ means any project in Infrastructure sector.

[Notification No. 31/2025/F. No. 225/06/2024/ITA-II
CASTRO JAYAPRAKASH T., Under Secy.

FAQ :

The notification designates Housing and Urban Development Corporation (HUDCO) bonds, issued from April 1, 2025, as eligible 'long-term specified assets' for capital gains tax relief under Section 54EC.

Only HUDCO bonds that are redeemable after five years and issued on or after 1st April 2025 are eligible.

Section 54EC allows taxpayers to claim exemption from capital gains tax by investing in specified long-term assets.

HUDCO must utilise the proceeds solely for infrastructure projects that can service their debt from project revenues, without relying on State Governments.

Infrastructure includes all sub-sectors defined in the Department of Economic Affairs' notification dated October 11, 2022, and any subsequent amendments or additions.