CBDT has notified a TDS exemption for specified payments made to eligible units operating in an International Financial Services Centre (IFSC) under the Income Tax Act, 2025. The exemption covers specified income such as interest, dividend, professional fees, commission, brokerage and certain financial service-related receipts, subject to the prescribed conditions. The change is intended to simplify withholding-tax compliance for eligible IFSC transactions and further support India’s development as an international financial services hub.

How Does It Matter to Businesses?

Businesses making payments to entities operating in an IFSC should not automatically deduct TDS merely because the nature of payment would ordinarily attract withholding tax. Before processing such payments, the finance team should verify whether the recipient is an eligible IFSC unit, whether the particular income is covered by the notification and whether the prescribed conditions have been satisfied. Updating vendor masters and TDS configurations can also help prevent unnecessary tax deductions and subsequent refund or reconciliation issues.

Mardia Global | Tax & Accounting Insights for Businesses in India