Certain payments to units in IFSC exempted from TDS
The Central Board of Direct Taxes (CBDT) in a notification said that no TDS will have to be deducted for payments to units in sectors like FinTech, banking, fund management entity, finance company, credit rating agency, insurance intermediary and investment banking.
The government has exempted certain payments made to units of 14 services sectors in IFSC from TDS provisions effective April 1, a move which will reduce tax compliance burden.
The Central Board of Direct Taxes (CBDT) in a notification said that no TDS will have to be deducted for payments to units in sectors like FinTech, banking, fund management entity, finance company, credit rating agency, insurance intermediary and investment banking.
The TDS exemption will now be applicable on payments like professional/referral fee, brokerage income, interest on External Commercial Borrowings /Loans, insurance commission, dividend and credit rating fee.
International Financial Services Centre (IFSC) in Gujarat is being developed as a tax-neutral enclave for the financial sector.
Nangia & Co LLP Partner Amit Agarwal said the notification by the CBDT offers a significant relief by exempting specified payments made to the units in IFSC from TDS.
Previously, exemptions from withholding tax were limited to payments associated with leasing of ships, leasing of aircraft among others. However, the recent notification broadens the scope, encompassing various payments such as interest on ECBs, professional fees, referral fees, dividend income to finance companies, banking units, etc, established in IFSC.
"From an M&A perspective, the inclusion of payments like investment advisory fees and professional fees to Investment Advisors and Fund Management entities respectively, enhances the appeal of establishing fund structures in IFSC," Agarwal said.
The process laid down includes the furnishing of Form No. 1 by an IFSC unit to the payer following which the payer shall not deduct the TDS.
The notification shall come into force from April 1, 2024, and relaxations provided therein shall be applicable for 10 consecutive assessment years. Further, the payer will also be required to furnish the particulars of all such payments in the TDS statement.
"It is certainly a welcome step and no less relevant in order to promote IFSC as a global investment destination," Agarwal said.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Retirement Planning: SIP+SWP combination; Rs 15,000 monthly SIP for 25 years and then Rs 1,52,000 monthly income for 30 years
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
EPF vs SIP vs PPF Calculator: Rs 12,000 monthly investment for 30 years; which can create highest retirement corpus
Home loan EMI vs Mutual Fund SIP Calculator: Rs 70 lakh home loan EMI for 20 years or SIP equal to EMI for 10 years; which can be easier route to buy home; know maths
09:27 PM IST