NHAI Bonds

NHAI bonds are AAA-rated debt instruments issued by the National Highways Authority of India. The bonds include 54EC Capital Gain Bonds, Tax Free Bonds and NHAI InvIT Bonds. In 2022, NHAI discontinued issuing new Capital Gain Bonds. The funds are primarily used to finance national highway projects, improve the national road transit infrastructure and support infrastructure growth. These bonds offer fixed coupon payments and are ideal for conservative investors comfortable with fixed cash flows.

54EC Capital Gain Bonds

54EC Capital Gain Bonds allow investors to claim income tax exemption on Long Term Capital Gains (LTCG) from the sale of long term asset, such as land, buildings, or both. Individuals can invest the entire LTCG component in these bonds within 6 months of sale to claim the tax exemption. Investors can claim up to Rs 50 lakh tax exemption on capital gain bonds. These bonds are not listed on the stock exchange.

NHAI 54EC Capital Gains Bonds for the year 2022-23 have been discontinued after 3 September 2022. Fresh issues in NHAI 54EC bonds are not available. Investors looking for tax exemption under Section 54EC can still invest in capital gain bonds issued by REC (Rural Electrification Corporation), IRFC (Indian Railway Finance Corporation), or PFC (Power Finance Corporation).

Tax Free Bonds

Tax-Free Bonds are a type of bond in which the coupon payments by the issuer to the bondholders are exempt from income tax under Section 10(15)(iv)(h) of the Income Tax Act, 1961. These bonds are listed on stock exchanges, allowing investors to buy bonds and sell them in the secondary market if they wish to redeem their investment before maturity.

NHAI Tax Free Bonds are AAA-rated long-term debt instruments, indicating minimal credit risk. These tax free bonds usually have maturity periods of 10 to 15 years and are ideal for risk-averse investors looking for tax-efficient and steady returns.

Active NHAI Tax Free Bond Options

Below is the list of active NHAI tax free bonds listed on NSE and BSE:-

NHAI InvIT Units

National Highways Infra Trust (NHAI InvIT) Units are AAA rated investment options, indicating the highest safety for interest and principal. NHAI InvIT units are listed on stock exchanges, allowing investors to buy and sell. The interest income of these bonds is taxable under the Income Tax Act and is subject to capital gains tax. Investors should consider implication of tax on bonds as it can impact post-tax yield.

National Highways Infra Trust, sponsored by NHAI, was set up in 2021 to support the Government of India's National Monetization Pipeline (NMP). The trust monetises national highway projects through the securitisation routes, toll-operate-transfer and infrastructure investment trusts.

Active NHAI Infrastructure Units

Below is the list of active National Highways Infra Trust (NHAI InvIT) Units listed on NSE and BSE:-

NHAI bonds, i.e., tax free bonds and infrastructure bonds, are listed on the stock exchanges NSE and BSE. Investors can buy that bond directly from its existing investors through the stock exchange(s) at its market price.

Retail investors can purchase and sell NHAI bonds through conventional stock brokers and OBPP (Online Bond Platform Providers). Open a demat and trading account with any registered broker and search for the bond with its name in the bond/debt section or ISIN code.

In December 2024, NHAI’s SPV, DME Development Limited (DMEDL), issued green bonds to fund avenue and median plantation, natural stormwater drainage, construction of animal underpasses, waste recycling & reuse, installation of streetlight on renewable energy (solar) and rainwater harvesting. The green bond issue raised Rs 775 crores with a base issue size of Rs 500 crores and a green-shoe option to retain oversubscription up to Rs 275 crores. The bond offers an annual yield of 7.23% p.a.

In May 2017, NHAI launched a masala bond at the London Stock Exchange, aimed at financing the expansion of national highways. The issue was significantly upsized from Rs 1,500 crore to Rs 3,000 crore at a price yielding 7.30% annually due to overwhelming investor demand.