Govt Notifies TDS Exemption for IFSC Units from July 2025:

Govt Notifies TDS Exemption for IFSC Units from July 2025 The Ministry of Finance (Department of Revenue) has recently issued an official notification dated June 20, 2025, stating that the central government provides exemption from the Tax Deduction at Source (TDS) under provisions of the Income-tax Act, 1961, for certain units working in International Financial Services Centres (IFSCs). This decision has been taken by the government in exercise of its powers offered under sub-section (1F) of section 197A read with subsections (1A) and (2) of section 80LA of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act). This exemption is set to come into effect on July 01, 2025. This decision has been taken to improve cash flow for IFSC units and make the process of doing business easier. This notification is only applicable to some specific types of businesses (called units) that are based in IFSCs, including BATF Service Providers (Bookkeeping, Accounting, etc.), Broker-Dealers (like stock market agents), Finance Companies, Fund Management Entities, Recognised Clearing Corporations, Recognised Depositories and Recognised Stock Exchanges. Provided, all these units should be working in Special Economic Zones (SEZs) under IFSCs and should have been approved to carry out business in these zones.

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The table below mentions what types of payments made to whom will not be subject to TDS under which sections:

Sl. No.	International Financial Services Centre (IFSC Unit) (Payee)	Nature of Receipt (Payment)	Relevant TDS Provisions under Income tax Act
1	BATF Service Provider	Professional or Consulting or Advisory fees	194J
2	Broker-Dealers	Payment made by Recognised Stock Exchanges	194J
		Commission Incentives	194H or 194C
3	Finance Company	Interest on account of lease	194A
		Freight Charges or Hire Charges	194C
4	Fund Management Entity	Portfolio management fees	194J
		Investment advisory fees	194J
		Management Fees	194J
		Performance Fees	194J
5	Recognised Clearing Corporation	Professional or Technical Services fees	194J
		Interest Income	194A
		Penalty levied on clearing members	194J
6	Recognised Depository	Professional or Technical or Contractual fees	194J or 194C
7	Recognised Stock Exchange	Professional or Technical Services fees	194J
		Rent for Data Centres	194I
		Interest Income	194A
		Penalty levied on Members by Stock Exchanges	194J

Hence, if a payer like a client, bank, or stock exchange makes any of the listed payments to be said to be eligible for an IFSC unit, then they do not need to deduct TDS. Refer to the official notification for complete information