Tax Planning
Tax Planning in India: Leveraging IFSC Units TDS Exemptions
A recent CBDT notification exempts certain payments made to eligible IFSC units from TDS, opening up new planning opportunities for investors, service providers, and financial institutions under India’s Income-tax Act, 2025.
By NomadicTax Research Team • 5-8 min read • August 13, 2026
## What is the IFSC framework?
IFSC (International Financial Services Centre) Units are special units in India designated to promote international financial services. They benefit from regulatory relaxations and tax incentives to attract foreign investments and global services.
## New TDS Exemptions (Notification No. 80/2026)
The Central Board of Direct Taxes (CBDT), in Notification No. 80/2026 [F. No. 275/19/2026-IT(B)], has explicitly **exempted certain payments from TDS**, including:
- Interest, dividends
- Professional fees, commission, brokerage
- Other financial-service related income
provided these are **received by eligible IFSC Units** under the Income-tax Act, 2025. This rule is **effective from 1st April 2026**, for the financial year 2026-27 and assessment years onward. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/latest-news?page=%2C0&year=2026&utm_source=openai))
## Planning opportunities
| Who benefits | How you can plan | Key conditions to check |
|---------------|-------------------|-------------------------|
| Financial institutions, banks, trusts operating via IFSC | Structure income flows through IFSC units to take advantage of TDS non-deduction | Ensure the IFSC unit qualifies under the Act and applicable regulations (“eligible unit”) |
| Individuals and professionals providing services to IFSC entities | Negotiate contracts with the payment clause specifying receipts through eligible IFSC Units | The payer must verify IFSC eligibility to avoid downstream TDS issues |
| Foreign investors seeking dividend or interest income | Route investments or accounts through IFSC entities to avoid TDS at source | Check that the underlying IFSC unit is properly registered and recognized in law |
## Risks and compliance reminders
- **Certification**: IFSC Units must be officially eligible under rules issued by CBDT; missing documentation may result in withholding despite exemption.
- **Treatment for both payer and recipient**: Payers must correctly apply exemption, or they risk liabilities or penalties.
- **Cross-border implications**: For non-resident recipients, treaty/DDAA considerations may still apply; exemption from TDS doesn’t negate other taxes.
## Example scenario
Suppose “Global FinServ IFSC Pvt Ltd.” in GIFT City receives ₹10 million in professional fees from a domestic company in India during FY 2026-27. Under Notification No. 80/2026, if both are properly eligible, the domestic company **need not deduct TDS** on that payment, potentially improving cash flow for Global FinServ.
## Actionable steps
1. Review eligibility status of any IFSC unit you’re connected with.
2. Amend service or dividend contracts to reference payment through an eligible IFSC.
3. Maintain documentation confirming eligibility as per CBDT rules.
4. Coordinate with tax advisors to ensure this aligns with your full tax profile and DTAAs if international.
**Bottom line**: The recent exemption from TDS for income received by eligible IFSC Units presents a **high-impact planning tool** for those operating in or with IFSCs. Structuring payments appropriately can reduce immediate tax burden, but careful documentation and eligibility checks are essential to avoid pitfalls.