CBDT’s New TDS Exemption for IFSC Payments What Taxpayers Need to Know
From July 2025, the CBDT has rolled out a major relief — a TDS exemption for payments to International Financial Services Centre (IFSC) units. This move aims to boost India’s global financial competitiveness and ease cross-border transactions.
What Is an IFSC Unit?
An International Financial Services Centre (IFSC) is a special zone regulated by the International Financial Services Centres Authority (IFSCA). IFSCs (like GIFT City, Gujarat) allow financial institutions to offer global financial products and services in India with tax and regulatory incentives.
Who Benefits from This TDS Exemption?
Under CBDT Notification No. ___/2025 (to be notified), the exemption applies to:
- Payments made by Indian residents to IFSC units for specific financial services.
- Transactions covered under approved IFSCA guidelines.
- Eligible IFSC entities must hold a valid certificate issued by IFSCA.
Legal Reference
- Section 197A of Income-tax Act, 1961 – Empowers CBDT to notify classes of income exempt from TDS.
- IFSCA Act, 2019 – Governs IFSC operations in India.
- Upcoming CBDT notification (expected in July 2025) will define scope and conditions.
What Payments Are Covered?
While the detailed list will be clarified soon, typically exempt payments may include:
- Offshore derivative instruments
- Global currency and interest rate swaps
- Fund management fees
- Other cross-border financial contracts as notified
📌 Always verify eligibility with the latest CBDT circulars and IFSCA guidelines.
How to Claim the TDS Exemption for IFSC Payments
Confirm that the payee is a registered IFSC unit with a valid certificate.
Ensure the payment falls under the notified services.
Maintain proper documentation for audit and verification.
Disclose exempt payments correctly while filing TDS returns to avoid mismatches.
Quick Comparison: With vs Without TDS Exemption
| Aspect | Before July 2025 | From July 2025 (Proposed) |
|---|---|---|
| TDS on payments to IFSC | Applicable as per section 195 | Exempt if conditions are met |
| Certificate needed | No | Yes (IFSCA registration) |
| Benefit | NA | Cash flow ease & tax clarity |
Expert Tip
👉 Always check the official CBDT notification and IFSCA certificate validity. Incorrect exemption claims may attract penalties.
✅ Pro Tip: Keep an updated compliance checklist — it helps avoid notices under Section 201 for failure to deduct TDS.
FAQs on TDS Exemption for IFSC Payments
Q1. Is Form 15CA/CB still needed?
Yes, unless specifically exempted under revised RBI and Income Tax rules. Always consult your CA.
Q2. Do I need to report exempt payments in TDS returns?
Yes. Mention them as ‘Nil TDS’ in the relevant quarterly statements.
Q3. Can non-IFSC entities claim this benefit?
No. Only certified IFSC units are eligible.
Final Thoughts
The TDS exemption for IFSC payments marks a big step towards making India a global financial hub. It cuts compliance costs and enhances ease of doing cross-border business.
👉 Need help with TDS compliance or IFSC payments? Talk to our tax experts at Efiletax. Stay compliant, stay stress-free!
Summary
From July 2025, CBDT’s new TDS exemption for IFSC payments will ease tax compliance for cross-border financial transactions. Learn eligible payments, legal basis, and smart filing tips to avoid penalties. Efiletax helps you stay compliant.