The Central Board of Direct Taxes (CBDT) has officially notified a new issue of zero coupon bonds by the National Bank for Agriculture and Rural Development (NABARD), under clause (48) of section 2 of the Income-tax Act, 1961, read with Rule 8B of the Income-tax Rules, 1962. The move enables tax treatment benefits to the notified instruments and is expected to support long-term rural development financing.
The notified zero coupon bonds will have the following key features:
- Name of the Bond: Zero Coupon Bond of The National Bank for Agriculture and Rural Development (NABARD)
- Period of Life: Ten years, eleven months, and thirteen days
- Time Schedule of Issue: To be issued on or before March 31, 2027
- Redemption Amount: ₹19,500 crore at maturity
- Discounted Issue Price: ₹9,150.375 crore (implying a discount of ₹10,349.625 crore)
- Number of Bonds: 19.50 lakh units
Zero coupon bonds are issued at a discount and do not carry periodic interest payments. Instead, they are redeemed at face value upon maturity. The difference between the issue price and redemption value represents the yield to the holder. In this case, the substantial discount reflects the long maturity period and the nature of the bond as a deferred liability instrument.
The special notification grants these NABARD bonds the status of “zero coupon bonds” under the Income-tax Act, enabling favorable tax treatment of the discounted amount under capital gains, rather than interest income, for qualifying holders. Such instruments are typically subscribed to by institutional investors and used to fund long-term infrastructure and development projects.
This issue aligns with NABARD’s ongoing role in mobilizing resources for agricultural and rural development and comes at a time when long-term capital for such sectors remains a government priority.
Notification Details
Notification No. 56 /2025
Date: 12/06/2025
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