TDS Exemption for IFSC Units Under Notification 80/2026
Eligible IFSC units can now receive certain payments without tax being deducted at source by providing Form 1(N) to the payer.
- Document
- Notification Notification No. 80/2026
- Dated
- 13 Jul 2026
- Effective
- 1st day of April, 2026
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Eligible IFSC units are exempt from TDS on specific income streams.
- Units must submit Form 1(N) to the payer to claim this exemption.
- Payers must stop deducting tax once they receive the valid declaration form.
- Exemption applies to interest, dividends, professional fees, and commission income.
In short
Notification 80/2026 allows units in an International Financial Services Centre (IFSC) to receive certain payments without Tax Deducted at Source (TDS), which is tax withheld from payments before you receive them.
What has changed
How it worked before
Previously, payers were required to deduct tax at source on these payments regardless of the recipient's status as an IFSC unit.
What has changed
Eligible IFSC units can now opt out of TDS for specific income types by filing a formal declaration in Form 1(N) with the payer.
Who this affects
Units operating within an International Financial Services Centre, such as banking units, finance companies, investment advisors, and fintech entities.
An example
A registered investment advisor operating in an IFSC receives advisory fees from a client. Previously, the client deducted TDS from these fees. Under this new rule, the advisor submits Form 1(N) to the client. The client then pays the full fee amount without deducting any tax.
What you should do
If you are an eligible IFSC unit, submit Form 1(N) to your payer to stop tax deductions on your eligible income.
If you do nothing
If you do not provide the required Form 1(N), the payer will continue to deduct tax as they did before. There is no penalty for not filing the form, but you will lose the benefit of receiving the full payment upfront.
The terms explained
- TDS (Tax Deducted at Source)
- Tax withheld by the payer from payments made to a recipient.
- IFSC Unit
- A business entity registered to operate within an International Financial Services Centre.
- Payer
- The person or business making a payment to you.
The original document
| Issued by | IT |
|---|---|
| Document | Notification Notification No. 80/2026 |
| Full title | CBDT has issued Notification No. 80/2026 [F. No. 275/19/2026-IT(B)], notifying that specified payments such as interest, dividends, professional fees, commission, brokerage, and other financial service-related income received by eligible IFSC Units shall be exempt from TDS under the Income-tax Act, 2025. |
| Issued on | 13 July 2026 |
| Effective | 1st day of April, 2026 |
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