Govt grants tax-saving status to IREDA bonds to boost green energy investments
At the COP26 summit in 2021, India announced its ‘Panchamrit’ climate pledge
The central government has granted tax-saving status to bonds issued by the Indian Renewable Energy Development Agency Ltd (IREDA) under Section 54EC of the Income Tax Act. The move aims to facilitate low-cost fundraising for renewable energy projects while offering capital gains tax exemption to investors.
CBDT notification effective from July 9, 2025
According to an official statement by the Ministry of New and Renewable Energy (MNRE), the Central Board of Direct Taxes (CBDT) notified the bonds as ‘long-term specified assets’ on July 9, 2025. This means that investments in IREDA’s bonds, redeemable after five years and issued on or after the notification date, will now qualify for capital gains tax exemption under Section 54EC of the Income-tax Act, 1961.
What this means for investors
Investors can now save long-term capital gains tax of up to Rs 50 lakh in a financial year by parking their gains in IREDA bonds. These bonds are expected to attract wider investor participation, particularly those seeking tax-saving avenues with a sustainable impact.
Boost for renewable energy financing
The proceeds from these bonds will be utilised exclusively for renewable energy projects that are capable of servicing their debt through project revenues, without relying on state government support. This structure not only ensures financial discipline but also bolsters the credibility of clean energy initiatives.
IREDA, a public sector undertaking under MNRE, will benefit from a reduced cost of capital, which could accelerate the rollout of renewable energy projects nationwide. This aligns with India’s broader goals under the Nationally Determined Contributions (NDCs) and its 2030 renewable targets.
Story continues below Advertisement
Welcoming the development, IREDA Chairman and Managing Director Pradip Kumar Das said, “We are deeply grateful to the Ministry of Finance, Ministry of New & Renewable Energy and the CBDT for this valuable policy initiative. This recognition reinforces IREDA’s pivotal role in renewable energy financing. The tax-exempt status will offer an attractive investment avenue while ensuring increased capital availability for green energy projects.”
He added that this step would significantly contribute to achieving India’s target of 500 GW of non-fossil fuel capacity by 2030.
Context
At the COP26 summit in 2021, India announced its ‘Panchamrit’ climate pledge, which includes:
- Achieving 500 GW non-fossil electricity capacity
- Meeting 50 percent of energy requirements from renewables
- Cutting emissions by 1 billion tonnes by 2030
- Reducing emissions intensity of GDP by 45 percent
- Achieving net-zero emissions by 2070