No TCS on Goods Purchases by IFSC Units u/s 206C(1H) of Income Tax Act: Finance Ministry [Read Order]

The Ministry of Finance, through Notification No. 6/2025 dated January 6, 2025, has announced that International Financial Services Centre ( IFSC ) Units will not be classified as buyers for the purpose of Tax Collection at Source ( TCS ) under Section 206C(1H) of the Income Tax Act, 1961. The notification is effective from 1st January 2025.

This exemption is subject to the following conditions:

Conditions for Buyers (IFSC Units):

Submission of Declaration (Form No. 1A): The buyer (IFSC Unit) must furnish a statement-cum-declaration in Form No. 1A to the seller. This form should include details of the previous years relevant to the 10 consecutive assessment years during which the buyer opts for claiming deductions under Section 80LA(1A) and 80LA(2) of the Income Tax Act, 1961.

Annual Verification of Declaration: The declaration must be verified annually in the manner specified in Form No. 1A. It should confirm eligibility for deductions for each relevant previous year covered under the declaration.

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Conditions for Sellers:

No TCS Collection: Sellers must not collect TCS on payments received from the buyer after receiving the statement-cum-declaration (Form No. 1A).

Reporting Exempted Transactions: Sellers are required to include details of all exempted payments in the statement of collection of tax as per Sub-section (3) of Section 206C, and Rule 31AA of the Income Tax Rules, 1962

The relaxation provided in this notification will apply to the buyer only for the specific years that are part of the 10 consecutive assessment years declared by the buyer in Form No. 1A. These are the years for which the buyer has chosen to claim deductions under Section 80LA of the Income Tax Act.

For any other years outside this 10-year period, the seller will be required to collect tax on payments received from the buyer as per the regular provisions of the law.

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Definitions:

• Buyer: The buyer must always be an International Financial Services Centre ( IFSC ) Unit as defined under sub-clauses (a) and (d) of the Explanation to Section 80LA of the Income Tax Act.
• International Financial Services Centre (IFSC): It refers to the definition provided in clause (q) of Section 2 of the Special Economic Zones Act, 2005 (28 of 2005).
• Seller: The term "seller" follows the definition in clause (b) of the Explanation to sub-section (1H) of Section 206C of the Income Tax Act.
• Unit: A "Unit" is defined as per clause (zc) of Section 2 of the Special Economic Zones Act, 2005 (28 of 2005).

The Principal Director General of Income-tax (Systems) or the Director General of Income Tax (Systems), as applicable, will establish procedures, formats, and standards to ensure the secure capture, transmission, and uploading of data and documents. They will also be responsible for developing and implementing appropriate policies for the security, archival, and retrieval of records.

To Read the full text of the Notification CLICK HERE

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