IREDA Joins Elite League with Capital Gains Bond Approval, Boosting Clean Energy Financing

Image Source: KNN India

The Indian Renewable Energy Development Agency (IREDA) has received formal approval from the Ministry of Finance to issue capital gains tax exemption bonds under Section 54EC of the Income Tax Act. This move positions IREDA alongside REC, PFC, NHAI, HUDCO, and IRFC as one of the few state-run entities authorized to offer such instruments, aimed at channeling long-term investments into renewable energy infrastructure.

Key Highlights and Strategic Implications:

The bonds will be redeemable after five years and are eligible for capital gains tax exemption if invested within six months of selling immovable property.
Investors can invest up to ₹50 lakh per financial year, with an interest rate of 5.25%, and a lock-in period of five years.
Proceeds from these bonds must be deployed exclusively in renewable energy projects that are financially self-sustaining—i.e., capable of servicing debt from project revenues without reliance on state governments.
The approval was granted via Notification No. 73/2025 dated July 9, 2025, under clause (ba) of the Explanation to Section 54EC.

Market Context and Outlook:

IREDA’s inclusion is expected to deepen its funding pool and reduce cost of capital, enhancing its ability to support India’s clean energy transition.
The move aligns with the government’s broader push to incentivize green investments and provide tax-efficient instruments for long-term investors.
Shares of IREDA remained stable at ₹166.2, though the stock is down 25% YTD and 45% from its all-time high of ₹310.

Sources: CNBC-TV18, TaxGuru, CAclubIndia, ICICIdirect, CBDT Notification No. 73/2025, Ministry of Finance