Budget 2026: Govt Proposes to Extend Deduction Period for Units in IFSC:

Budget 2026: Govt Proposes to Extend Deduction Period for Units in IFSC In an effort to boost the competitiveness of India's International Financial Services Centre (IFSC) at GIFT City, the Government has proposed to extend the 100% income tax deduction period for units to 20 consecutive years out of a 25-year window.

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Currently, section 147 of the Income Tax Act offers a 100% tax deduction on incomes to the units of IFSC and Offshore Banking Units (OBUs). This deduction is available for 10 consecutive years out of a 15-year period for IFSC units, and the OBUs located within the IFSC get the deduction for 10 consecutive years. The Finance Minister, Nirmala Sitharaman, in the Union Budget 2026, proposed a major change to make GIFT City more competitive. Starting from April 1, 2026, the deduction period for IFSC units will increase to 20 consecutive years out of a 25-year period and OBUs will get the deduction for 20 consecutive years straight.

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Additionally, the business income of these units in IFSC will be taxed at the rate of 15% after the said period of deduction ends. These changes are effective from April 1, 2026, for Tax Year 2026-27 and subsequent years.