Overview
In July 2026, the Central Board of Direct Taxes (CBDT) issued Notification No. 80/2026 under F. No. 275/19/2026-IT(B), declaring that specified payments like interest, dividends, professional fees, brokerage, and financial-service-related income received by eligible IFSC Units shall be exempt from TDS (Tax Deducted at Source) under the new Income-tax Act, 2025. (incometax.gov.in)
Here’s how IFSC Units and their payers can take advantage of this change — and where care is needed.
Who qualifies as an IFSC Unit – and what payments are covered?
| Feature | Details |
|---|---|
| Eligible Unit | Unit registered in an International Financial Services Centre (e.g. GIFT IFSC), and opted to claim deduction under Section 147 for 10 consecutive tax years out of 15. (incometax.gov.in) |
| Covered Payments | Interest, dividends, professional & brokerage fees, commission and other financial-service related income. (incometax.gov.in) |
| Not Deducted by Payer (TDS Nullified) | The payer must receive from the IFSC Unit a valid Form No. 1-New-28 (statement-cum-declaration) to avoid deducting TDS. (incometax.gov.in) |
Practical steps for IFSC Units
- Verify registration and eligibility: Ensure registrations are valid, and the plan to claim Section 147 benefits for 10 out of the next 15 years is documented.
- Form 1-New-28 submission: Submit this statement-cum-declaration to each payer of income. Without this, payer must still deduct TDS. (incometax.gov.in)
- Maintain proper records: Keep proof of payments, forms submitted, and documentation supporting the 10-year election.
- Coordinate with payers: Payers should be aware of the requirement; sometimes they may request clarifications or attach conditions.
What payers should do differently
- On receiving Form 1, record it properly and set internal processes so they do not deduct TDS on covered payments.
- Ensure that the nature of services fits within the specified kinds listed.
- Retain Form 1 record in case of audit or review.
Examples
Example 1: An IFSC unit providing financial advisory services receives ₹10 lakh as professional fees. It has submitted a valid Form 1 to the payer. Before this notification, the payer would deduct TDS (say 10%). With the exemption, no TDS will be deducted, freeing up cash-flow.
Example 2: Another IFSC unit hasn’t opted for Section 147 or didn’t provide Form 1. Payer must continue deducting TDS despite notification. The unit loses benefit.
Interplay with other rules & risk points
- Only those IFSC Units that opted for the 10-out-of-15-year election under section 147 qualify.
- If eligible income is misclassified, payer may be forced to deduct TDS anyway, with risk of penalties.
- IFSC Units should verify that they meet the conditions before claiming exemption.
Action Points
- Check if your entity qualifies, opt in under section 147, and ensure every payer gets Form 1.
- If you’re a payer, integrate validation steps to verify that Forms 1 are genuine before zero-rating TDS.
- Update accounting systems so that entries and withholding calculations incorporate these new rules from the effective date.
Takeaway: Eligible IFSC Units in India can significantly improve cash-flow and reduce compliance burden under the latest CBDT TDS exemption rule — but only by ensuring eligibility and keeping documentation tight. With proper coordination, both units and payers gain.