TaxTMI 
TaxTMI 
Guidance Note – Form 2
X X X X Extracts X X X X
X X X X Extracts X X X X
....uidance Note – Form 2<BR>Income Tax<BR>Dated:- 24-3-2026<BR><BR>Guidance Note - Form 2 Application for Notification of a Zero-Coupon Bond under Rule 7 Purpose of Form 2: Form 2 is prescribed under Rule 7 of the Income-tax Rules and is used by: ⮚ Infrastructure capital companies ⮚ Infrastructure capital funds ⮚ Infrastructure debt funds ⮚ Public sector companies to apply for notification of a Zero-Coupon Bond (ZCB) under Section 2(112) of the Income-tax Act, 2025 (earlier Section 2(48) of the ITA, 1961). Notification of a ZCB is a mandatory pre-condition for the bond to qualify as a "zero-coupon bond" for tax purposes. Only notified ZCBs are eligible for the spe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial tax treatment of discount under Section 32(1)(d). Form 2 ensures that the Central Government can evaluate whether the proposed bond issuance satisfies the statutory conditions relating to: ⮚ Minimum/maximum tenure ⮚ Investment commitments ⮚ Rating requirements ⮚ Listing requirements ⮚ Reporting and compliance undertakings Who Should File Form 2 Form 2 must be filed by an entity proposing to issue a Zero-Coupon Bond and seeking notification from the Central Government. Eligible entities include: 1. Infrastructure capital company 2. Infrastructure capital fund 3. Infrastructure debt fund 4. Public sector company (a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s defined under Companies Act or statute) When to File Under Rule 7: ⮚ Form 2 must be filed at least 3 months before the proposed date of bond issue. ⮚ Applications cannot be filed for a bond to be issued beyond two tax years following the tax year of application. ⮚ The Central Government must dispose of the application within 6 months of receipt. How to File As per Rule 7: ⮚ Form 2 must be furnished electronically using: ■ Digital Signature, or ■ Electronic Verification Code (EVC). Supporting documents must be attached electronically with the form. Filing Count (Illustrative) The number of Form 2 filed over the past five years....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is 06. Structure of Form 2 The Form is structured into Part A (Applicant Identification) and Part B (Bond and Investment Details). Part A - Personal / Entity Information Information includes: ⮚ Tax Year ⮚ Name of Applicant / Entity ⮚ PAN ⮚ Aadhaar (Individuals) ⮚ Address (segregated fields for system uniformity) ⮚ Contact details (phone, mobile linked to Aadhaar, email) This mirrors the standardization changes also introduced across forms under the new regime. Part B - Bond Details and Investment Plan Key fields include: 1. Category of Applicant ■ Infrastructure capital company ■ Infras....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tructure capital fund ■ Infrastructure debt fund ■ Public sector company 2. Date of Incorporation / Registration with supporting document. 3. Additional details for Infrastructure Debt Funds: ■ Notification number under Schedule VII (Table 46) ■ Approval date under Section 10(47) (now Schedule VII reference) 4. Objects of the Applicant ■ Main and ancillary objects supported by Memorandum / Trust Deed. 5. Nature of Business (for public sector companies). 6. Bond Issuance Details ■ Total number of bonds ■ Amount for which bonds will be issued ■ Amount payable at maturity ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....■ Discount ■ Period of life of bond (years/months/days) Rule 7 requires tenure 10 to 20 years. 7. Financial / Tax Year of issuance. 8. Objects of the Issue - Purpose for raising funds through ZCB. 9. Detailed Investment Plan Includes: ■ Name of investee entity ■ Nature (public sector / other enterprise) ■ PAN / Aadhaar (if applicable) ■ Address and project details ■ Project commencement and operation dates ■ Sources of investment (own funds, borrowings, other bonds, etc.) ■ Management team executing the project ■ Funds proposed to be invested across six tax years These ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....details help verify compliance with mandatory investment timelines under Rule 7: ■ Infrastructure companies/funds: 25% in T+1 year, balance within 4 years ■ Public sector companies: 15% in T+1 year, balance within 6 years 10. Project Report Availability - Must be attached if available. 11. Declaration & Undertakings The Form requires an undertaking consistent with Rule 7: ■ ZCB proceeds will be invested within statutory timelines ■ Infrastructure debt funds will maintain a sinking fund for interest accrual invested in government securities. Verification & Certification Requirements Form 2 is filed by the authorized signatory of the applicant entity. A Power of Att....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orney must be attached where applicable. Additionally, after notification: • Rule 7 requires the entity to file Form 3 annually within 2 months from end of each relevant tax year, certified by an accountant as defined in Section 515(3)(b). Key Legal Framework [Rule 7 Overview] Rule 7 sets out: Conditions for Notification Before a ZCB is notified, the Central Government must verify: 1. Tenure: 10-20 years 2. Credit Rating: Investment grade from two SEBI-registered credit rating agencies 3. Listing: Bond must be listed on a recognized stock exchange 4. Investment Undertakings o Infrastructure companies/funds: 25% within T+1 year; balance within 4 years ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... o Public sector companies: 15% within T+1 year; balance within 6 years o Infrastructure debt funds: Sinking fund requirement 5. Application Timelines 6. Submission of annual accountant certificate in Form 3 7. Power of Government to withdraw approval for non-compliance Functional Enhancements Form 2 incorporates modern formatting and system-readiness: • Segregated fields for name, PAN, address, etc. (uniform system structure) • Dropdowns and tick-boxes for entity category • Auto-computed tax year sequences for multi-year investment projections • Structured multi-row project and investment tables • Attachment-enabled sections (projec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t report, organizational structure, certificates) Outcome and Usage For the Applicant (Issuer) ■ Notification ensures the bond qualifies as a Zero-Coupon Bond under Section 2(112). ■ Discount becomes deductible on a pro rata basis under Section 32(1)(d). ■ Non-notified bonds are not eligible for such tax treatment. ■ Non-compliance with investment timelines or reporting obligations can lead to withdrawal of notification. For the Central Government ■ Ensures that notified ZCBs fund genuine long-term infrastructure development. ■ Provides mechanism to track utilization of ZCB proceeds through Form 3. Practical Guidance for Filing Form 2 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1. Prepare investment plans and project documentation well ahead of the 3-month filing deadline. 2. Ensure SEBI-compliant dual credit rating is obtained before filing. 3. Confirm that the bond can be listed on a recognized stock exchange. 4. Attach all mandatory documents: o Certificate of incorporation / registration o Trust deed (for funds) o Project report o Organizational structure o Notification copies (IDF approvals) 5. Use consistent project data across multiple tables. 6. Ensure undertakings are correctly selected (company/fund/IDF/PSC). 7. Maintain internal tracking for mandatory investments in T+1 to T+6 tax years. 8. After notification and iss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uance, timely file Form 3 each year. Conclusion ■ Form 2 provides a structured, transparent, and detailed framework to assess eligibility for issuing Zero-Coupon Bonds under Rule 7. ■ Correct and timely filing is critical for ensuring recognition of ZCBs and availing tax benefits. ■ Entities must meticulously prepare supporting documentation, investment plans, and compliance undertakings to avoid delays or rejection. =============<BR> News - Press release - PIB....