In a move to incentivize investments in green energy, the government has granted tax benefits to bonds issued by the Indian Renewable Energy Development Agency Ltd. (IREDA). The Central Board of Direct Taxes (CBDT) under the Ministry of Finance has notified IREDA bonds as 'long-term specified assets' under Section 54EC of the Income-tax Act, 1961. The notification, effective from July 9, 2025, allows investors to claim capital gains tax exemptions on investments in these bonds.

Under the new guidelines, bonds issued by IREDA on or after July 9, 2025, that are redeemable after five years will qualify for the tax exemption benefits under Section 54EC of the Income Tax Act, 1961. This provision permits eligible investors to save tax on Long Term Capital Gains (LTCG) up to ₹50 lakh in a financial year by investing in these bonds.

IREDA, as a premier renewable energy financing institution, is expected to benefit significantly from this policy change. The tax-exempt status is projected to attract a wider pool of investors, seeking tax-saving instruments, and provide IREDA with access to lower-cost funds. This, in turn, is expected to support the expeditious development of the renewable energy sector. The funds raised through these bonds will be exclusively allocated to renewable energy projects that can service their debt through project revenues, without relying on state government support.

The government's decision has been welcomed by IREDA. Shri Pradip Kumar Das, Chairman & Managing Director of IREDA, expressed gratitude to the Ministry of Finance, Ministry of New & Renewable Energy, and CBDT for this policy initiative. He stated that the recognition reinforces IREDA's crucial role in accelerating renewable energy financing in the country. Das believes that the tax-exempt status will make IREDA bonds an attractive investment option, ensuring increased capital availability for green energy projects, thereby contributing to India's ambitious goal of achieving 500 GW of non-fossil fuel capacity by 2030.

This initiative aligns with the government's broader strategy to promote renewable energy and reduce carbon emissions. By providing tax incentives for green investments, the government aims to mobilize greater financial resources for the sector and accelerate the transition to a sustainable energy future. The measure is expected to not only boost renewable energy financing but also deepen the investor base for green bonds in the country.