Soon, save capital gains tax under Section 85, invest in international bonds online

Investing in tax-saving capital gains bonds under Section 85 of the Income-tax Act 2025 (or Section 54EC of the IT Act, 1961) and international bonds is set to become easy for retail investors as the Securities and Exchange Board of India (SEBI) has allowed online bond platforms to offer these instruments.

Through a circular dated August 14, 2026, SEBI permitted online bond platform providers (OBPPs) to sell Section 85 bonds as well as overseas debt instruments regulated by the International Financial Services Centres Authority (IFSCA) at GIFT City. The regulator also eased the compliance officer requirement for platforms.

Online bond platforms can now offer tax-saving bonds either under a different tab or on any other website/ platform.

With this circular, the full product menu for OBPPs now includes listed debt securities, municipal and securitised debt instruments, government securities, SDLs, Treasury Bills, Sovereign Gold Bonds, products regulated by SEBI, RBI, IRDAI, IFSCA or PFRDA, and the newly added Section 54EC bonds.

These changes, SEBI said, have been prompted by "certain suggestions received from various stakeholders to promote ease of doing business".

The circular, issued by SEBI's Department of Debt and Hybrid Securities, became effective from August 14, 2026. It amends the NCS Master Circular of October 15, 2025 that governs OBPPs under Regulation 51A of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.

What are the new rules for tax-saving bonds?

Section 54EC bonds (or Section 85 bonds under the Income-tax Act 2025), issued by entities such as NHAI and REC, allow taxpayers to save long-term capital gains from tax by investing the sale proceeds from property transactions into these instruments. An investor is allowed to invest up to ₹50 lakh in these instruments that come with a five-year lock-in and are non-transferable.

Until now, the capital gains tax-saving bonds were not part of the product basket that SEBI-regulated online bond platforms could offer. Investors typically had to approach issuers directly. SEBI's August 14 circular changes this, adding "bonds issued under section 54EC of the Income Tax Act, 1961 or Section 85 of the Income-tax Act, 2025" to the list of permitted instruments.

However, the regulator has drawn clear boundaries.

OBPPs will need to provide a disclaimer that these are tax-specific instruments, and grievance redressal mechanism for these instruments does not lie with SEBI but lies with the issuers.

Platforms will need to disclose key features of 54EC bonds, including eligible issuers, lock-in period, investment limit, non-transferable status, and tax benefits, etc.

They should also "prominently disclose that investment in these instruments is intended for investors seeking to avail the tax benefits associated therewith, subject to satisfaction of the eligibility criteria and other conditions prescribed under the applicable provisions of the Income-tax Act".

A window to GIFT City

Less noticed but equally significant is SEBI's decision to let OBPPs offer IFSCA-regulated products. This is likely to open a channel for retail investors to access overseas debt instruments from their screens, subject to FEMA rules and Liberalised Remittance Scheme (LRS) limits.

However, the circular highlights that such products be "clearly labelled as international or overseas instruments, to prevent confusion with domestic debt securities" and offered "in the manner specified for SEBI-registered stock brokers operating within the GIFT-IFSC."

"In the case of products, securities, or services regulated by IFSCA, OBPPs shall offer them in the manner specified for SEBI-registered stock brokers operating within the GIFT-IFSC and in compliance with applicable guidelines under the Foreign Exchange Management Act (FEMA), 1999, including Overseas Investment Rules and limits under the Liberalised Remittance Scheme (LRS). Further, such products/securities/services shall be clearly labelled as international or overseas instruments, to prevent confusion with domestic debt securities," SEBI said.

Compliance burden eased

Separately, the regulator has replaced the requirement that OBPPs appoint a Company Secretary as compliance officer. Instead, the online bond platforms must now have a compliance officer "as per SEBI (Stock Brokers) Regulations, 2026, who shall comply with certification requirements (i.e. NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund) Certification Examination) for stock brokers, as prescribed from time to time".

The change is meaningful for smaller platforms as it widens the talent pool and could lower compliance costs.