[Opinion] CBDT’s New Notification on IFSC Units

Suraj R. Agrawal – [2025] 175 taxmann.com 1048 (Article)

1. Beginning – A Game-Changer at the Center of India’s Financial Future

Picture a global investment fund manager in Singapore looking at India’s International Financial Services Center (IFSC) in GIFT City as a place to set up shop. What keeps them from? Difficult compliance, tax breaks, and procedural burdens. Now think about a change that not only gets rid of these problems but also makes them want to come in. The Central Board of Direct Taxes (CBDT) has done just that with its most recent Notification No. 67/2025, which was sent out on June 20, 2025.

This isn’t just a new tax law; it’s a change in policy. The Indian government is showing that it wants to make GIFT City a competitive global financial hub by not taxing certain payments made to IFSC units. This action affects important issues like how easy it is to do business, how well taxes work, and how confident investors are around the world.

This article will explain what this notification really means, why it matters, and how it changes the tax system in India as its financial system changes.

2. What the Notification Means – No TDS for Certain IFSC Units

Section 197A(1F) of the Income-tax Act, 1961, along with Sections 80LA(1A) and (2), is what this notice is all about. The main idea is simple but strong – some payments made to units in IFSCs will not be subject to TDS.

But what does it mean? Not at all easy. This effectively removes a big layer of compliance, gives these units more working capital, and makes them more appealing to investors.

Who gains?

The notification includes a lot of different things:

• BATF Service Providers
• Dealers and Brokers
• Companies that lend money
• Companies that manage funds
• Clearing Corporations that are recognised
• Recognised Depositories
• Stock Exchanges That Are Well-Known

All of these work within India’s IFSC ecosystem, which is mostly GIFT City right now. They have all been recognised as important parts of India’s plans to become a major player in international finance.

3. Breaking Down the Payments That Are Not Taxable

The government has been very clear about what kinds of payments are not subject to TDS. Let’s clear up a few things:

1. Fund managers in GIFT City who give portfolio and investment advice no longer have to pay TDS on fees like management and performance fees. This makes GIFT City a good place for global fund setups to do business.
2. Finance companies won’t have to pay TDS on interest from leases or freight and hire charges. This is very important for aviation, shipping, and leasing companies that work out of IFSCs.
3. Stock exchanges and clearing corporations don’t have to pay TDS on interest, penalties, or professional fees either. This makes the backend of the financial infrastructure easier to use.

This is not a blanket exemption; it is a carefully planned way to help. Only payments that are listed in the notification and made to units that are allowed to do business under the IFSC regime are valid.

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