The Central Government specifies the Ten year Zero Coupon Bond of NABARD as zero coupon bond under section 2(48) Income Tax Act. The duration of the bond is ten years eleven months thirteen days, to be issued on or before the 31st day of March, 2027, the amount to be paid on maturity or redemption of the bond is Rs.1,00,000/- for each bond, the number of bonds to be issued is 19.50 lakhs, for Rs 19500 Crores.
— A Zero Coupon Bond (ZCB) is a financial instrument that does not pay periodic interest (coupon) during its tenure. Instead, it is issued at a discount and redeemed at its face value upon maturity. The difference between the issue price and face value represents the return for investors. If held beyond 12 months, the long term capital gainswill attract a 12.5% tax rate. If sold before 12 months, the short term capital gains will be taxed as per the bondholder’s income tax slab.