CBDT Classifies IRFC's Rs 10,000 Crore Bond as Zero Coupon Bond for Tax Purposes

The Central Board of Direct Taxes (CBDT) has issued a significant ruling clarifying the tax treatment of bonds issued by the Indian Railway Finance Corporation (IRFC). The CBDT has specifically classified IRFC's ₹10,000 crore worth of bonds as zero-coupon bonds for income tax purposes. This classification carries the benefit of allowing tax deferral on the accrued interest until the maturity of the bonds, which is expected to be advantageous for infrastructure financing initiatives. The CBDT's decision provides much-needed clarity on the tax implications of deep discount bonds issued by government-backed financial institutions operating in the infrastructure sector.