TDS EXEMPTION ON PAYMENTS TO SPECIFIED IFSC UNITS

A Notification is issued by CBDT on 10 July 2026 notifying that no TDS is to be deducted under Section 393 of the Income Tax Act, 2025 from payments made to below specified Units of International Financial Services Centre (IFSC).

i. Banking Unit,
ii. IFSC Insurance Intermediary office,
iii. Finance Company,
iv. Finance Unit,
v. Fund Management entity,
vi. Broker Dealer,
vii. Investment advisor,
viii. Registered Distributor,
ix. Custodian,
x. Credit rating agency,
xi. Investment banker,
xii. Debenture trustee,
xiii. International Trade Finance Service or “ITFS”, and
xiv. FinTech Entity

This notification has force from 1st day of April, 2026. It is mandatory for the Payer to obtain a declaration in Form No. 1(N) from the deductee and also furnish particulars of these payments in the Quarterly TDS returns filed by the Deductor.

In the year 2024, the CBDT had issued a similar Notification2 under Income-tax Act, 1961 where same list of transactions appeared to be exempted from TDS deduction. However, this Notification of 2026 seems to be issued just to clarify that such payments are also exempt from TDS, subject to availability of documents like Declaration in Form 1(N), as per the provisions of the Income-tax Act, 2025.

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