Tax-savvy investors now have a greener option: bonds issued by the Indian Renewable Energy Development Agency (IREDA) are officially designated as “long-term specified assets” under Section 54EC of the Income-tax Act, 1961. This means that, effective July 9, 2025, investing in IREDA bonds can help you gain an exemption from capital gains tax, while simultaneously contributing to India’s burgeoning renewable energy sector.
Thank you for reading this post, don't forget to subscribe!“This recognition under Section 54EC underscores IREDA’s vital role in accelerating renewable energy financing in the country,” stated Pradip Kumar Das, Chairman and Managing Director of IREDA. “The tax-exempt status for our bonds provides an appealing investment avenue and ensures increased capital for green energy projects, directly supporting India’s ambitious goal of 500 GW non-fossil fuel capacity by 2030.”
IREDA, a government-owned financial institution under the Ministry of New and Renewable Energy, issues these debt instruments to raise funds for renewable energy projects across India, making them an attractive choice for those interested in sustainable finance.
Under Section 54EC, investors can channel long-term capital gains of up to ₹50 lakh into these specified bonds, with a five-year lock-in period, to secure exemption from tax on those gains. This initiative not only offers a valuable fiscal benefit but also directs private savings towards the nation’s green growth objectives.
Significantly, the proceeds from these bonds are earmarked exclusively for renewable energy projects that can independently service their debt, without requiring support from state governments.
IREDA offers a variety of bonds, including tax-free bonds with tax-exempt interest, taxable bonds with higher yields, green bonds specifically for eco-friendly projects, and subordinated bonds with higher risk but potentially greater returns. These bonds generally receive high ratings from agencies like CARE and ICRA, providing fixed returns and strong government backing, which enhances their safety for conservative investors.
Investors can acquire IREDA bonds through online platforms such as GoldenPi and IndiaBonds, or via registered brokers specializing in debt securities. However, it’s prudent for investors to consider potential risks, including interest rate fluctuations, the impact of inflation on real returns, and limited liquidity if there’s a need to sell before maturity.
This new tax break is anticipated to broaden the investor base seeking secure, tax-efficient options, and will significantly bolster India’s renewable energy financing ecosystem. This move highlights the government’s unwavering commitment to accelerating sustainable energy development and achieving its climate goals.
