In a significant move aimed at bolstering India's International Financial Services Centre (IFSC), the Central Board of Direct Taxes (CBDT) issued Notification No. 28/2024 on March 7, 2024. This notification brings forth a crucial exemption from tax deductions under various sections of the Income-tax Act, 1961 ("the IT Act") for units operating within the IFSC.
The notification highlights that units within the IFSC will be exempt from tax deductions for a variety of income types, including interest, professional fees, dividends, and commissions. This exemption encompasses payments made by any payer to a qualifying IFSC unit, across a spectrum of sectors including banking, insurance intermediaries, finance companies, and more.
Effective from April 1, 2024, the exemption is poised to incentivize businesses to operate within the IFSC framework, fostering an environment conducive to growth and innovation in the financial services sector. By eliminating tax deductions, the notification aims to enhance the competitiveness of IFSC units on a global scale, positioning India as a preferred destination for international financial activities.
However, the benefits of this exemption come with certain conditions. IFSC units must adhere to specified criteria and provide necessary declarations to avail themselves of these tax benefits. Compliance with regulatory standards and reporting requirements is essential for maintaining eligibility for the exemption, ensuring transparency and accountability within the IFSC ecosystem.
This move by the CBDT is aligned with the government's broader vision to transform India into a global financial hub. By offering tax incentives to IFSC units, the government aims to attract foreign investment, facilitate cross-border transactions, and stimulate economic growth. Moreover, it underscores India's commitment to international best practices in financial regulation and taxation, enhancing its reputation as a reliable and business-friendly jurisdiction.
Official copy of the notification has been attached below
CAclubindia
