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PGT & Associates offers Income Tax filing and planning, GST registration and returns, Statutory and Tax Audit, Company Registration, Transfer Pricing, International Taxation, ITAT representation, NCLT advocacy, M&A Advisory, and Project Finance.

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PGT & Associates is based at 308-309, Sahajanand Palace, 100 Feet Anand Nagar Road, Ahmedabad, Gujarat 380015, India.

How long has PGT & Associates been in practice?

PGT & Associates was established in 1996 by Dr. CA Pradeep Tulsian and has practised as a Chartered Accountancy firm since 1996.

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Call +91-87994-99189 or email info@pgtandassociates.com. We offer a free initial consultation.

Does PGT & Associates handle GST notices and income tax notices?

Yes. PGT & Associates handles GST notices, income tax notices and demands, appeals before CIT(A), ITAT, GSTAT, NCLT, and GST/income tax litigation.

Does PGT & Associates offer CA articleship training?

Yes. PGT & Associates offers CA and CMA articleship training in Ahmedabad with hands-on exposure to Income Tax, GST, Audit, Company Law, and International Taxation.

Does PGT & Associates handle transfer pricing and international taxation?

Yes. PGT & Associates has a dedicated International Taxation and Transfer Pricing division handling Form 3CEB, APA, FEMA compliance, Form 15CA/15CB, and DTAA advisory.

IFSC TDS Relief Under the Income-tax Act, 2025: CBDT Notification 80/2026 and Form 1(N) Explained

Aug 17

4 min read

CBDT’s Notification No. 80/2026 materially changes withholding-tax administration for eligible units operating in an International Financial Services Centre (IFSC). Rather than granting a blanket exemption, the notification creates a targeted no-deduction mechanism for specified categories of IFSC units and specified receipts, subject to documentary and reporting conditions.

The legal framework

The Central Government issued Notification No. 80/2026 [F. No. 275/19/2026-IT(B)], S.O. 3743(E), dated 10 July 2026, exercising powers under section 400(1) read with section 147 of the Income-tax Act, 2025. The notification is deemed to have come into force from 1 April 2026.

Its core effect is that a payer need not deduct tax under the specified TDS provisions when making the listed payments to an eligible IFSC unit, provided the notification’s conditions are met. This is a withholding-tax relaxation; it should not be confused with a general exemption of the underlying income from tax.

Which IFSC entities and receipts are covered?

The notification identifies fourteen classes of IFSC units, including Banking Units, IFSC Insurance Intermediary Offices, Finance Companies, Finance Units, Fund Management Entities, Broker Dealers, Investment Advisers, Registered Distributors, Custodians, Credit Rating Agencies, Investment Bankers, Debenture Trustees, International Trade Finance Service (ITFS) units and FinTech Entities.

The eligible receipt is not identical for every entity. Depending on the class of unit, the notification covers specific items such as interest on external commercial borrowings or loans, professional fees, referral fees, brokerage, commission on factoring and forfaiting, insurance commission, dividends, investment-advisory fees, distribution fees, custodial or trusteeship fees, credit-rating fees, investment-banking fees and technical or professional fees for qualifying FinTech entities.

This entity-by-entity and receipt-by-receipt design is important. A payment merely being made to an entity located in GIFT IFSC does not by itself establish that TDS can be skipped. The payer must test the exact regulatory status of the payee and the exact nature of the payment against the notification.

Registration with IFSCA remains central

The notification ties eligibility to the relevant IFSCA regulatory framework. The IFSC unit must be registered under the applicable regulation or circular, and the qualifying service must fall within the recognised financial-services framework referred to in the notification. In practice, payers should retain current evidence of registration and should not rely only on the payee’s address or commercial description.

Form 1(N): the document that activates non-deduction

The payee must furnish a statement-cum-declaration in Form No. 1(N) to the payer. The form records, among other matters, the IFSC unit’s identity, PAN, address, tax year, regulatory permission or registration and the period for which the deduction under section 147 is being claimed.

The notification requires the declaration to identify the twenty consecutive tax years for which the IFSC unit opts to claim the section 147 deduction. Importantly, the statement-cum-declaration is to be furnished and verified for each tax year within that twenty-year period.

The payer’s obligation does not disappear

Once the payer receives the prescribed declaration, it is required not to deduct tax on qualifying payments made or credited thereafter. But the payer must still report the particulars of payments on which tax has not been deducted in the applicable TDS statement under section 397(3)(b) read with rule 219 of the Income-tax Rules, 2026.

This makes the reform a compliance redesign rather than a compliance removal. The deduction step may disappear for a qualifying payment, but the documentation, classification and reporting burden becomes more important because the payer must be able to demonstrate why non-deduction was legally justified.

Five practical controls for finance and tax teams

Build an IFSC-vendor master control. Capture the regulatory category of each IFSC payee, registration details, validity and the specific nature of services supplied.
Do not code all GIFT IFSC payments as ‘no TDS’. Match each invoice or payment stream with the specific receipt listed for that category of IFSC unit.
Obtain and archive Form 1(N) before applying non-deduction. The notification makes receipt of the declaration a critical trigger for the payer’s treatment.
Track the twenty-year election at the payee level and tax-year level. Non-deduction is available only during the declared period; payments outside it must be reassessed for TDS.
Reconcile no-TDS payments with the TDS statement. Finance systems should separately tag these transactions so the reporting requirement is not missed merely because tax was not actually deducted.

Why this matters beyond GIFT City

The measure reduces withholding friction for selected IFSC financial-service businesses, but it also moves more responsibility to the payer’s internal controls. Treasury teams, banks, investment managers, group finance functions and professional advisers making payments to IFSC entities should therefore treat the notification as a classification-and-documentation project, not simply as a lower-TDS rule.

Professional takeaway

Before processing a no-TDS payment to an IFSC unit, ask four questions: Is the payee an eligible category of IFSC unit? Is the receipt specifically covered for that category? Is the regulatory registration in order? Has a valid Form 1(N) for the relevant tax year been received and retained? If any answer is uncertain, the payment should be escalated for tax review before the withholding treatment is finalised.

Primary source

Central Board of Direct Taxes, Notification No. 80/2026 [F. No. 275/19/2026-IT(B)], S.O. 3743(E), dated 10 July 2026, under the Income-tax Act, 2025; listed by the Income Tax Department in its July 2026 updates.

Disclaimer: This article is for general professional information and does not constitute legal or tax advice. The application of the notification depends on the exact status of the IFSC unit, nature of payment, registration, declaration and facts of each transaction. Professional advice should be obtained before applying non-deduction of tax.