MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 7th March, 2024
INCOME TAX
S.O. 1135(E).—In exercise of the powers conferred by sub-section (1F) of section 197A read with sub-
section (1A) and sub-section (2) of section 80LA of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred as the
Income-tax Act), the Central Government hereby notifies that no deduction of tax shall be made under the provisions
of the Income-tax Act as specified in column (4) of the Table below in respect of the payments, as specified in column
(3) of the said Table, made by any ‘payer’ to a person being a Unit of International Financial Services Centre,
(hereinafter referred as ‘payee’), as specified in column (2) of the said Table:-
List of payments receivable by a Unit of International Financial Services Centre (IFSC)
TABLE
| Sl. No. | International Financial Services Centre (IFSC Unit) (Payee) | Nature of receipt | Relevant TDS provisions as per Income-tax Act, 1961 |
|---|
| (1) | (2) | (3) | (4) |
| 1. | Banking Unit | Interest income on External Commercial Borrowings /Loans | Section 195 |
| | Professional fees | Section 194J |
| | Referral fees | Section 194H |
| | Brokerage income | Section 194H |
| | Commission income on factoring and forfaiting services | Section 194H |
| 2. | IFSC Insurance Intermediary office | Insurance commission | Section 194D |
| 3. | Finance Company | Interest income on External Commercial Borrowings /Loans | Section 195/ 194A |
| | Dividend income | Section 194 |
| | Commission income on factoring and forfaiting services | Section 194H |
| 4. | Finance Unit | Interest income on External Commercial Borrowings /Loans | Section 195/ 194A |
| | Dividend income | Section 194 |
| | Commission income on factoring and forfaiting services | Section 194H |
| 5. | Fund Management entity | Professional fee | Section 194J |
| 6. | Broker Dealer | Dividend | Section 194 |
| 7. | Investment advisor | Investment advisory fee | Section 194J |
| 8. | Registered Distributor | Distribution fee and Commission fee | Section 194H |
| 9. | Custodian | Professional fee | Section 194J |
| | Commission fee | Section 194H |
| 10. | Credit rating agency | Credit rating fee | Section 194J |
| 11. | Investment banker | Investment banker fee | Section 194J |
| 12. | Debenture trustee | Trusteeship fee | Section 194J |
| 13. | International Trade Finance Service or “ITFS” | Commission income | Section 194H |
| 14. | FinTech Entity | Technical fee/Professional fee | Section 194J |
| | Commission income | Section 194H |
- For the purposes of this notification, –
- (a) “Banking Unit” shall have the same meaning as assigned to it in clause (c) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Banking) Regulations, 2020;
- (b) “Broker dealer” shall have the same meaning as assigned to it in clause (g) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 and the provisions of regulations 3, 5, 6 and regulation 7 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 6 under column (2) of the above table;
- (c) “Credit rating agency” shall have the same meaning as assigned to it in clause (j) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 and the provisions of regulations 3, 5, 6 and regulation 7 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 10 under column (2) of the above table subject to registration of such credit rating agencies by International Financial Services Centres Authority;
- (d) “Custodian” shall have the same meaning as assigned to it in clause (l) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 and the provisions of regulations 3, 5, 6 and regulation 7 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 9 under column (2) of the above table;
- (e) “Debenture trustee” shall have the same meaning as assigned to it in clause (m) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 and the provisions of regulations 3, 5, 6 and regulation 7 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 12 under column (2) of the above table subject to registration of such debenture trustee by International Financial Services Centres Authority;
- (f) “Finance Company” shall have the same meaning as assigned to it in clause (e) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021;
- (g) “Finance Unit” shall have the same meaning as assigned to it in clause (f) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021;
- (h) “FinTech Entity” shall have the same meaning as assigned to it in sub-paragraph (i) of paragraph 2 of the International Financial Services Centres Authority’s Circular, dated the 27th April, 2022 and paragraph 12 of the said circular shall apply to the International Financial Services Centre Unit specified against serial number 14 under column (2) of the above table;
- (i) “Fund management entity” shall have the same meaning as assigned to it in clause (p) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 and the provisions of regulations 3, 4 and regulation 5 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 5 under column (2) of the above table;
- (j) “IFSC insurance intermediary office” shall have the same meaning as assigned to it in clause (s) of sub-regulation (1) of regulation 3 of the International Financial Services Centres Authority (Insurance Intermediary) Regulations, 2021;
- (k) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
- (l) “International Trade Finance Service” or “ITFS” shall have the same meaning as assigned to it in sub-paragraph (iii) of paragraph 2B of the International Financial Services Centres Authority’s Circular, dated the 9th July, 2021 and paragraph 2E of the said circular shall apply to the International Financial Services Centre Unit specified against serial number 13 under column (2) of the above table;
- (m) “Investment adviser” shall have the same meaning as assigned to it in clause (t) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 (except the persons covered under proviso to clause (f) of sub-regulation (1) of regulation 3), and the provisions of regulations 3, 5, 6 and regulation 7 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 7 under column (2) of the above table;
- (n) “Investment banker” shall have the same meaning as assigned to it in clause (u) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 and the provisions of regulations 3, 5, 6 and regulation 7 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 11 under column (2) of the above table;
- (o) “Registered distributor” shall have the same meaning as assigned to it in clause (dda) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 and the provisions of regulations 3, 5, 6 and regulation 7 of the said regulations shall apply to the International Financial Services Centre Unit specified against serial number 8 under column (2) of the above table;
- (p) “Unit” shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
- (q) the “payee” under all circumstances shall remain an International Financial Services Centre Unit within the meaning of sub-clause (a) and (d) to Explanation under sub-section (3) of section 80LA of the Income-tax Act;
- (r) the services qualifying under this notification shall be the financial services under International Financial Services Centres Authority (Banking) Regulations, 2020 or International Financial Services Centres Authority (Insurance Intermediary) Regulations, 2021 or International Financial Services Centres Authority (Finance Company) Regulations, 2021 or International Financial Services Centres Authority (Fund Management) Regulations, 2022 or International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 or International Financial Services Centres Authority’s Circular, dated the 9th July, 2021 or International Financial Services Centres Authority’s Circular, dated the 27th April, 2022;
- (s) the International Financial Services Centre Unit shall be registered under relevant regulation or circular of International Financial Services Centres Authority.
2.1 The above provisions are subject to the following conditions, namely: -
- (a) The ‘payee’ shall –
- (i) furnish a statement-cum-declaration in Form No. 1 to the ‘payer’ giving details of previous years relevant to the ten consecutive assessment years for which the ‘payee’ opts for claiming deduction under sub-sections (1A) and (2) of section 80LA of the Income-tax Act; and
- (ii) such statement-cum-declaration shall be furnished and verified in the manner prescribed in Form No. 1, for each previous year relevant to the ten consecutive assessment years for which the ‘payee’ opts for claiming deduction under sub-sections (1A) and (2) of section 80LA of the Income-tax Act.
- (b) The ‘payer’ shall –
- (i) not deduct tax on payment made or credited to ‘payee’ after the date of receipt of copy of statement- cum-declaration in Form No. 1 from the ‘payee’; and
- (ii) also furnish the particulars of all the payments made to ‘payee’ on which tax has not been deducted in view of this notification in the statement of deduction of tax referred to in sub-section (3) of section 200 of the Income-tax Act read with rule 31A of the Income-tax Rules, 1962.
