REC Ten Year Zero Coupon Bond Notified by CBDT
The Central Board of Direct Taxes (CBDT) has officially notified the “Ten Year Zero Coupon Bond of REC Ltd.” as a zero coupon bond under Section 2(48) of the Income-tax Act, 1961. This update brings clarity for investors regarding tax treatment and eligibility of such instruments.
What Is a Zero Coupon Bond?
A zero coupon bond is a debt security that does not pay periodic interest. Instead, it’s issued at a discounted price and redeemed at face value upon maturity. The difference between the issue price and maturity amount is treated as income under tax laws.
Key Details of the REC Zero Coupon Bond Notification
As per Notification No. 43/2025 dated 29th May 2025, the following details apply:
| Particulars | Details |
|---|---|
| Issuer | REC Limited (formerly Rural Electrification Corporation Ltd.) |
| Bond Name | Ten Year Zero Coupon Bond |
| Maturity | 10 years from date of issue |
| Type | Zero Coupon Bond (as per Section 2(48)) |
| Taxation | Income taxable as per Section 2(29A) and 2(42A) |
📄 Source: Notification No. 43/2025-Income Tax
Taxation of Zero Coupon Bonds
Income from these bonds is taxable as capital gains:
- Short-Term Capital Gain (STCG) if held for less than 12 months
- Long-Term Capital Gain (LTCG) if held for more than 12 months
💡 LTCG on listed zero coupon bonds is taxed at 10% without indexation under Section 112.
Why This Notification Matters
- ✅ Legally clarifies the tax treatment for investors in REC bonds
- ✅ Provides regulatory recognition under Section 2(48)
- ✅ Ensures eligibility for LTCG benefits if held long enough
- ✅ Aligns with the government’s push for infrastructure financing through regulated instruments
Expert Tip from Efiletax
“Always check whether a bond is notified by CBDT under Section 2(48) before claiming LTCG benefits. Without official notification, the tax treatment could vary.”
— Tax Expert, Efiletax Team
How to Invest in REC Zero Coupon Bonds?
These bonds are typically issued via private placement or public debt issue. Investors must:
- Check issue details from REC Ltd. or NSE/BSE
- Confirm CBDT notification for zero coupon classification
- Hold in demat form for ease of capital gain tracking
Frequently Asked Questions (FAQs)
Q1. Are all REC bonds zero coupon?
No. Only the “Ten Year Zero Coupon Bond” specifically notified is eligible under Section 2(48).
Q2. What if I sell before maturity?
You’ll still be taxed on the gains made—STCG or LTCG depending on holding period.
Q3. Are these bonds listed on stock exchanges?
Most REC bonds are listed, but verify listing status before assuming LTCG rates.
Summary
REC Ten Year Zero Coupon Bond notified by CBDT under Section 2(48). Offers 10-year maturity with LTCG tax benefit. Taxed on maturity as capital gain.
Final Thoughts
With the CBDT’s notification, REC’s Ten Year Zero Coupon Bonds now stand recognized for favorable tax treatment. Investors should maintain holding period discipline and keep records for capital gains computation.