The Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance, has issued Notification No. 80/2026 dated July 10, 2026, providing that no tax shall be deducted at source on specified payments made to eligible units operating in an International Financial Services Centre (IFSC), subject to fulfilment of the prescribed conditions.
The notification has been issued in exercise of the powers conferred under Section 400(1), read with Section 147 of the Income-tax Act, 2025. It covers specified payments made by a payer to an eligible IFSC unit and identifies the corresponding TDS provisions under the Income-tax Act, 2025 that will not apply to such payments.
The relief extends to 14 categories of IFSC entities, including banking units, IFSC insurance intermediary offices, finance companies, finance units, fund management entities, broker dealers, investment advisers, registered distributors, custodians, credit rating agencies, investment bankers, debenture trustees, International Trade Finance Service entities and FinTech entities.
Depending upon the category of the IFSC unit, the specified receipts include interest on external commercial borrowings or loans, dividend income, professional and technical fees, referral fees, brokerage, insurance commission, investment advisory fees, distribution fees, trusteeship fees, credit-rating fees and commission income from factoring, forfaiting and other eligible financial services.
The exemption will be available only where the IFSC unit is duly registered under the relevant regulations or circulars of the International Financial Services Centres Authority. The payee must also continue to qualify as an IFSC unit within the meaning of the Income-tax Act, 2025.
To claim the benefit, the eligible IFSC unit is required to furnish a statement-cum-declaration in Form No. 1(N) to the payer. The form must specify the period of 20 consecutive tax years for which the unit has opted to claim deduction under Section 147. A separate duly verified declaration is required for each applicable tax year.
Upon receiving Form No. 1(N), the payer shall not deduct tax on the specified payments made or credited thereafter. However, the payer will be required to report all such payments, on which tax has not been deducted, in the prescribed TDS statement under the Income-tax Act, 2025 and the Income-tax Rules, 2026.
The TDS relaxation will remain available only during the 20 consecutive tax years declared by the IFSC unit. For payments relating to any other tax year, the payer will remain liable to deduct tax in accordance with the applicable provisions.
The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) has been authorised to prescribe the procedures, formats and standards for secure collection, transmission and uploading of data and documents under the notification.
The notification shall be deemed to have come into force from 1 April 2026. The explanatory memorandum clarifies that the retrospective operation of the notification will not adversely affect any person.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/07/CBDT-Notification-No.-80-2026.pdf
