Budget 2026: 15% Tax Rate Proposed on Business Income of Offshore Banking Units, IFSC Units [Read Finance Bill 2026]
Finance Bill proposes a 15% concessional tax rate on the income of IFSC and Offshore Banking Units under the new Section 218
![Budget 2026: 15% Tax Rate Proposed on Business Income of Offshore Banking Units, IFSC Units [Read Finance Bill 2026]](https://images.taxscan.in/h-upload/2026/02/01/2123128-budget-2026-tax-rate-business-income-offshore-banking-units-ifsc-units-taxscan.webp "Budget 2026: 15% Tax Rate Proposed on Business Income of Offshore Banking Units, IFSC Units [Read Finance Bill 2026]")
The Union Budget for the Financial Year 2026-27 was presented by Finance MinisterNirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026). The Finance Bill, 2026, introduces a new concessional tax framework for Offshore Banking Units (OBUs) and units located in International Financial ServicesCentres (IFSCs) under the Income-tax Act, 2025, marking a shift away from...
The Union Budget for the Financial Year 2026-27 was presented by Finance MinisterNirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026).
The Finance Bill, 2026, introduces a new concessional tax framework for Offshore Banking Units (OBUs) and units located in International Financial ServicesCentres (IFSCs) under the Income-tax Act, 2025, marking a shift away from the earlier deduction-based regime.
Under the new law, Section 147 classifies specified business income of OBUs and IFSC units, while Section 218 provides the mechanism for computing tax on such income. Income of the nature referred to in Section 147(3) will be taxed at a flat concessional rate of 15%, with the balance income of the assessee continuing to be taxed at normal rates.
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“218. Where the total income of an assessee includes income of the nature referred to in section 147(3), the aggregate of income-tax payable by the assessee shall be the aggregate of income-tax computed on the income specified in column B of the Table below at the rate specified in the corresponding entry in column C of the said Table:
| Sl. No. | Income | Rate of income-tax payable |
| 1. | Income referred to in section 147(3) | 15% |
| 2. | Total income as reduced by income referred to in Sl. No. (1) | Rates in force |
This represents a departure from the earlier regime under Section 80LA of the Income-tax Act, 1961, which allowed deductions on qualifying IFSC and OBU income for a specified period. The new framework instead offers a predictable, rate-based concession aligned with international financial centre practices.
The move is aimed at increasing certainty, simplifying compliance, and strengthening India’s IFSC ecosystem, including GIFT City, by providing a globally competitive and stable tax regime for offshore banking and financial services activities.
The proposed provisions will take effect from 1 April 2026 and apply from the tax year 2026–27 onwards.
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