Notification u/s 2(48) of the Income Tax Act, 1961 in the case of Zero Coupon Bond of REC Ltd.

## Report on Income Tax Notification S.O. 2447(E) concerning Zero Coupon Bonds **1. Executive Summary:** This report analyzes Income Tax Notification S.O. 2447(E), issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (CBDT). This notification specifies the “Ten Year Zero Coupon Bond of REC Ltd.” as a zero coupon bond for the purposes of Section 2, clause 48 of the Income-tax Act, 1961. The notification outlines key particulars of the bond, including its term, issue timeline, maturity amount, discount, and number of bonds to be issued. The purpose of this notification is to formally designate this specific bond as a zero-coupon bond for income tax purposes, thus clarifying its tax treatment under the existing legislation. **2. Introduction:** This report provides an overview and analysis of Income Tax Notification S.O. 2447(E), based solely on the text provided. The report aims to inform affected industries about the key provisions of this notification concerning the designation of a specific bond as a zero coupon bond under the Income-tax Act, 1961. **3. Policy Overview:** * This is a new policy specification under the existing Income-tax Act, 1961. * **Core Objective:** To specify the "Ten Year Zero Coupon Bond of REC Ltd." as a zero coupon bond for the purposes of Section 2, clause 48 of the Income-tax Act, 1961. **4. Background and Rationale:** This notification specifies the characteristics of a particular financial instrument ("Ten Year Zero Coupon Bond of REC Ltd.") so that it falls under the definition of a zero-coupon bond as defined in Section 2, clause 48 of the Income-tax Act, 1961. This specification is likely necessary to provide clarity and legal certainty regarding the tax treatment of this bond. This likely allows for REC Ltd to issue the bond in a way that is tax efficient for investors, potentially incentivizing investment in the bond. **5. Key Provisions / Changes:** * This is a new policy designating a specific financial instrument, not an amendment to an existing policy. * The notification specifies the "Ten Year Zero Coupon Bond of REC Ltd." as a zero coupon bond for the purposes of Section 2, clause 48 of the Income-tax Act, 1961. * The following particulars of the bond are specified: * **Name of the bond:** Ten Year Zero Coupon Bond of REC Ltd. * **Period of life of the bond:** Ten years six months * **Time schedule of the issue:** To be issued on or before the 31st day of March 2027 * **Amount to be paid on maturity or redemption of the bond:** Rs. 5,000 crores * **Discount:** Rs. 2,200 crores * **Number of bonds to be issued:** Five lakhs **6. Target Audience and Stakeholders:** Based on the text, the target audience and stakeholders include: * **REC Ltd.:** The issuer of the bond. * **Potential Investors:** Individuals or entities considering investing in the "Ten Year Zero Coupon Bond of REC Ltd." * **Tax Authorities:** Responsible for administering the Income-tax Act, 1961. * **Financial Institutions:** Involved in the issuance, trading, or management of the bond. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Board of Direct Taxes (CBDT) under the Department of Revenue, Ministry of Finance, is the responsible agency. * **Timelines:** The bond is to be issued on or before the 31st day of March 2027. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes and impacts include: * **Clarity and Legal Certainty:** Providing clarity regarding the tax treatment of the "Ten Year Zero Coupon Bond of REC Ltd." under the Income-tax Act, 1961. * **Investment Incentive:** Potentially incentivizing investment in the bond due to the clarity in its tax treatment. * **Tax Implications:** Investors will be subject to the tax regulations applicable to zero coupon bonds as defined in Section 2, clause 48 of the Income-tax Act, 1961. **9. Conclusion:** Income Tax Notification S.O. 2447(E) formally specifies the "Ten Year Zero Coupon Bond of REC Ltd." as a zero coupon bond for income tax purposes, as per the Income-tax Act, 1961. This specification clarifies the tax treatment of this bond and is likely to influence investment decisions and REC Ltd's bond issuance strategy. This notification is significant for investors, REC Ltd, and tax authorities, as it establishes the framework for the tax treatment of this specific financial instrument.

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