CBDT Notifies TDS Exemption for Specified Payments to IFSC Units
The Central Board of Direct Taxes (CBDT) has issued Notification No. 80/2026 dated 10 July 2026, providing relief from Tax Deducted at Source (TDS) on specified payments made to eligible Units operating in an International Financial Services Centre (IFSC).
The notification has been issued under Section 400(1) read with Section 147 of the Income-tax Act, 2025 and is deemed to be effective from 1 April 2026.
What Does the Notification Provide?
Under this notification, no TDS is required to be deducted on specified payments made to eligible IFSC Units, provided the prescribed conditions are fulfilled.
The benefit is available to various categories of IFSC entities, including:
- Banking Units
- Finance Companies
- Finance Units
- Fund Management Entities
- Investment Advisers
- Broker Dealers
- Custodians
- Credit Rating Agencies
- Investment Bankers
- Insurance Intermediaries
- Registered Distributors
- International Trade Finance Service (ITFS) Providers
- FinTech Entities
Payments Covered Under the Notification
The TDS exemption applies to several specified receipts, including:
- Interest on External Commercial Borrowings (ECBs) and Loans
- Professional Fees
- Technical Fees
- Investment Advisory Fees
- Brokerage and Referral Fees
- Distribution & Commission Income
- Insurance Commission
- Credit Rating Fees
- Investment Banking Fees
- Trusteeship Fees
- Dividend Income (for specified IFSC Units)
- Commission on Factoring and Forfaiting Services
Conditions to Avail the TDS Exemption
The benefit is not automatic. To claim the exemption:
- The IFSC Unit (Payee) must furnish Form No. 1(N) to the payer.
- The declaration should specify the twenty consecutive tax years for which deduction under Section 147 is opted.
- The payer should stop deducting TDS only after receiving the prescribed declaration.
- The payer must report such payments appropriately in the TDS statement.
Effective Date
Although the notification was issued on 10 July 2026, it is deemed to have come into force from 1 April 2026.
Why This Matters
This notification is a significant step towards strengthening India’s International Financial Services Centre (IFSC) ecosystem by reducing TDS-related compliance on eligible transactions. It improves cash flow for IFSC entities and simplifies tax administration for both payers and eligible recipients.
Businesses making payments to IFSC Units should review whether the exemption applies and ensure that the required declaration in Form No. 1(N) is obtained before making payments without TDS.
Official Notification
CBDT Notification No. 80/2026 dated 10 July 2026 – TDS Exemption on Specified Payments to IFSC Units under the Income-tax Act, 2025.
Official PDF: https://www.incometaxindia.gov.in/documents/d/guest/notification-80-2026-pdf
Need Professional Assistance?
Seguro Advisors assists businesses with:
- TDS Compliance & Advisory
- IFSC Tax Advisory
- Income Tax Compliance
- International Taxation
- Corporate Tax Consulting
For assistance in evaluating the applicability of this notification to your business, feel free to contact our team.
