HUDCO bonds qualify as tax-saving instruments under 54EC

HUDCO bonds qualify as tax-saving instruments under Section 54EC

S.O. 1644(E).—In exercise of the powers conferred by clause (ba) of Explanation to section 54EC of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that bonds redeemable after five years and issued on or after 01st day of April, 2025, by the Housing and Urban Development Corporation Limited (HUDCO) (a public financial institution notified by the Central Government under section 2(72) of the Companies Act, 2013), as ‘long-term specified asset’ for the purposes of the said section.

2. HUDCO shall utilise the proceeds from such bonds only for those infrastructure projects which can service the debt out of the project revenues without being dependent on the State Governments for the service of debts.
   
   Explanation: For the purpose of this notification,
   (a) ‘Infrastructure’ includes all infrastructure sub-sectors as defined vide notification no. 262 of the Department of Economic Affairs, Ministry of Finance issued by F.No.13/1/2017-INF dated October 11, 2022 (Updated Harmonised Master List of Infrastructure sub-sectors) and shall include any amendments or additions made thereof;
   (b) ‘Infrastructure project’ means any project in Infrastructure sector.

Crux:

This notification allows HUDCO bonds (issued from April 1, 2025, with 5-year maturity) to qualify as tax-saving instruments under Section 54EC of the Income-tax Act. This means:

• Investors can claim capital gains tax exemption by investing in these bonds.
• HUDCO gains access to long-term, tax-incentivized funding.
• Funds raised must be used only for revenue-generating infrastructure projects, reducing fiscal burden on State Governments.

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3. TDS and TCS provisions applicable from April 1, 2025
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