Shares of the Indian Renewable Energy Development Agency (IREDA) and Housing And Urban Development Corp (HUDCO) were gaining sharply on Wednesday amid reports that the government was mulling steps to help the public sector firms get funds more easily.

What Happened: The Union budget is set to introduce measures to secure cheaper funds for IREDA and HUDCO as the Narendra Modi government aims to boost renewable energy and affordable housing, Moneycontrol reported, citing a government official.

The government plans to include IREDA and HUDCO under Section 54EC of the Income Tax Act. This move will exempt investors buying their bonds from capital gains tax, leading to lower interest rates than the current bond market, the official stated.

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Currently, Section 54EC of the IT Act allows tax exemptions on long-term capital gains from the sale of immovable assets if invested in specified PSUs like Rural Electrification Corp (REC) and Power Finance Corp (PFC). Including IREDA and HUDCO under this section will offer similar tax benefits, making it an attractive option for investors despite lower interest rates.

These bonds currently offer an interest rate of 5.25% per annum, compared to over 8% in the bond market for public sector undertaking (PSU) bonds.

Investments in these bonds must be made within six months of selling immovable property and held for at least five years. The finance ministry is reportedly finalising details, but no legislative changes are required, only an official notification.

Price Action: IREDA’s shares climbed 4.6% to ₹193.55 around noon on Wednesday, while HUDCO’s share price jumped 3.09% to ₹283.65.

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