CBDT notifies TDS Exemption for IFSCs under Income Tax Act w.e.f. 1st April, 2024 [Read Notification]

With an aim at fostering growth and investment in International Financial Services Centres ( IFSCs ), the Central Board of Direct Taxes ( CBDT ) has announced exemptions from Tax Deducted at Source ( TDS ) provisions under the Income-tax Act, 1961 with effect from 1st April 2024.

Citing powers conferred by sub-section (1F) of section 197A, along with subsection (1A) and sub-section (2) of section 80LA of the Income-tax Act, 1961, the Central Government has issued a notification specifying that no deduction of tax shall be made under specified provisions of the Income-tax Act.

The notification outlined that the exemption applies to payments made by any 'payer' to a person designated as a Unit of International Financial Services Centre, referred to as the 'payee.'

The lists of IFSC Units/ Payee includes Banking Unit, IFSC Insurance Intermediary office, Finance Company, Finance Unit, Fund Management entity, Broker Dealer, Investment advisor, Registered Distributor, Custodian, Credit rating agency, Investment banker, Debenture trustee, International Trade Finance Service or “ITFS” and FinTech Entity.

The receipts exempted from TDS are Interest income on External Commercial Borrowings /Loans, Professional fees, Referral fee, Commission income on factoring and forfaiting service, Dividend income..etc. For each payee, the nature of receipts are different and the relevant TDS provisions too.

The notification is enclosed with a Form 1, which shall be furnished by a Unit of International Financial Services Centre ( ‘payee’ ) to the ‘payer’. The Form 1 contains following details:

1. Name of the assessee:
2. Permanent Account Number:
3. Name and address of the Unit of International Financial Services Centre:
4. Date of permission obtained under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949) or permission or registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or permission or registration under the International Financial Services Centres Authority Act, 2019 ( 50 of 2019 ) or any other relevant law, as mentioned in sub-section (1A) of section 80LA of the Income-tax Act, 1961:
5. Statement-cum-Declaration
6. Verification

To Read the full text of the Notification CLICK HERE

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