CBDT Introduces Ten-Year Zero Coupon Bond by Power Finance Corporation Ltd. with Tax Benefits [Read Notification]

The Ministry of Finance, through the Central Board of Direct Taxes (CBDT), has issued Notification No. 19/2025, dated March 11, 2025, under the Income Tax Act, 1961. This notification specifies the details of a newly introduced Ten-Year Zero Coupon Bond issued by Power Finance Corporation Ltd. as per clause (48) of section 2 of the Income-tax Act, 1961.

What is a Zero Coupon Bond?

A Zero Coupon Bond is a type of bond that does not pay periodic interest (coupons) to investors. Instead, it is issued at a discounted price and redeemed at its full face value upon maturity. The difference between the purchase price and the maturity value represents the investor's earnings.

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Details of the Ten-Year Zero Coupon Bond:

As per the notification, the bond has the following key features:

• Bond Name: Ten-Year Zero Coupon Bond of Power Finance Corporation Ltd.
• Tenure: Ten years and one month
• Issuance Deadline: To be issued on or before March 31, 2027
• Maturity Value: Rs. 1,00,000 per bond upon redemption
• Discounted Price: Rs. 49,546 per bond (implying a gain of Rs. 50,454 upon maturity)
• Total Number of Bonds Issued: 10 lakh bonds

Why Issue a Zero Coupon Bond?

Zero coupon bonds are an attractive investment option for both institutional and retail investors due to their tax-efficient structure and fixed returns. Since these bonds do not pay interest periodically, investors do not face the burden of annual tax on interest income. Instead, they pay tax only at the time of redemption, making them a preferred choice for long-term financial planning.

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For the government and issuing institutions, these bonds serve as an effective fundraising tool without the immediate burden of interest payments. This helps in managing liquidity efficiently while ensuring capital availability for infrastructure and development projects.

The notification was signed by Ashwani Kumar, Under Secretary, and sets the legal framework for the bonds under rule 8B of the Income Tax Rules, 1962.

To Read the full text of the Order CLICK HERE

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