Zero-coupon bonds.

Why in news?

• The Central Board of Direct Taxes has amended the Income Tax rules to allow infrastructure debt funds (IDFs) to issue zero-coupon bonds.
• It will help in the mobilization of resources in a tax-efficient manner.
• A zero-coupon bond is a debt security instrument that does not pay interest.
• It is traded at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value indicates the investor’s return.
• Its value is inversely related to the rise in the interest rates.