Ireda gets nod to raise funds through 54EC bonds; how investors can save tax by funding green energy

The shares of Indian Renewable Energy Development Agency Ltd (Ireda) are likely to be in the spotlight on Thursday following the government decision to allow the company to raise money through tax-saving 54EC bonds, also known as capital gains bonds.

The Central Board of Direct Taxes (CBDT) has notified that Ireda’s bonds will now be treated as a ‘long-term specified asset’ under Section 54EC of the Income-tax Act, 1961. This means people who earn long-term capital gains, for instance by selling property, can save tax by investing up to ₹50 lakh in these bonds within a financial year.

This notification is effective July 9. The bonds issued on or after this date will have a lock-in period of five years. Though they offer a lower interest rate of 5.25%, the key attraction is the tax exemption benefit under Section 54EC.

The money raised through these bonds will be used only for renewable energy projects that can repay loans from their own revenues, without relying on state governments. For Ireda, this approval means access to cheaper funds, which can help boost financing for clean energy in the country.

Manish Kumar Goyal, chairman and managing director at Finkeda, said, "Investors can support green energy projects and access the benefits of LTCG tax relief, with the payments directed only into independently bankable renewable energy projects. The bonds are subject to a five-year lock-in and, therefore, almost all would be labeled as sustainable impacts, providing the opportunity to diversify its portfolio. If investors are looking for tax-qualified investment alternatives with an environmental focus, IREDA 54EC bonds will be a good opportunity."

Currently, other bonds eligible for exemption under Section 54EC of the Income Tax Act include those issued by Rural Electrification Corporation Limited (REC), National Highway Authority of India (NHAI), Power Finance Corporation Limited (PFC), and Indian Railway Finance Corporation Limited (IRFC). With Ireda now added to this list, investors have another option to save tax while supporting green energy initiatives.

Pradip Kumar Das, chairman and managing director of Ireda, welcomed the move, calling it a boost for renewable energy financing and a step toward meeting India’s target of 500 GW non-fossil fuel capacity by 2030.

The decision is expected to attract more investors looking for tax-saving opportunities and improve the flow of funds into the renewable energy sector.