🚨 TDS Exemption for GIFT City Units from July 1, 2025: Big Boost for IFSC Businesses

In a move that significantly enhances GIFT City's competitiveness as a global financial hub, the Government of India has notified zero TDS on certain payments made to units operating in GIFT IFSC. This step aligns with Section 80LA of the Income-tax Act, 1961 and comes into effect from July 1, 2025.

💡 What Does the Notification Say?

As per Notification No. 67/2025 dated June 20, 2025, there shall be no deduction of tax at source (TDS) under specified provisions for payments made by any payer to a unit in an IFSC, provided certain conditions are met.

This applies to payments for:

IFSC Entity	Nature of Payment	TDS Section (Now Exempt)
BATF Service Providers	Professional/Advisory Fees	194J
Broker-Dealers	Commission/Incentives from Stock Exchanges	194J / 194H / 194C
Finance Companies	Interest on Lease, Freight or Hire	194A / 194C
Fund Management Entities	PMS/Advisory/Performance Fees	194J
Clearing Corporations	Tech/Prof Fees, Interest, Penalties	194J / 194A
Recognised Depositories	Contractual/Tech Fees	194J / 194C
Stock Exchanges	Tech Fees, Data Rent, Penalties, Interest	194J / 194A / 194I

📝 Conditions to Claim TDS Exemption:

1. Form 1 Declaration:

   • The IFSC Unit (Payee) must submit a statement-cum-declaration (Form No. 1) to the payer.

   • It should cover 10 consecutive assessment years for which 80LA deduction is claimed.

     
     

2. Compliance by Payer:

   • No TDS should be deducted after receiving Form 1.

   • The payer must report such payments in quarterly TDS statements under Section 200(3) read with Rule 31A.

📊 Why GIFT City TDS Exemption Matters:

✅ Enhances liquidity by avoiding upfront tax deduction.

✅ Boosts investor and business confidence in GIFT City.

✅ Reduces paperwork & tax credit mismatch for IFSC units.

✅ Aligns with the 10-year tax holiday under Section 80LA.

📅 Effective Date:

⏰ 1st July 2025

🏛️ Legal Backing:

• Section 197A(1F) + Section 80LA(1A) & 80LA(2) of the Income Tax Act

• Applicable only for approved business income of IFSC units under SEZ rules

🔚 Conclusion:

This GIFT City TDS Exemption is a landmark move for the Indian financial ecosystem, aligning tax laws with global financial centres. It cements GIFT City’s status as a preferred destination for fintech, asset management, and offshore operations.

Businesses, fund managers, banks, and capital market entities should ensure:

• Correct filing of Form 1

• Updated systems for reporting & compliance

Book a Tax Compliance Call

Detailed Circular by CBDT

📥 Need Help?

Get expert assistance on:

• Form 1 Declarations

• 80LA Compliance Structuring

• Zero-TDS Implementation in Your ERP

📩 Schedule a free 30-min consult with GIFTCFO: Click Here