Currency of operations
IFSC units operate in foreign currency. GIFT City's guide describes banking units as transacting in specified foreign currencies, with a Special Non-Resident Rupee account allowed for administrative expenses. IFSCA's circular of 29 January 2025 has since widened that account's use to all business-related rupee transactions of the unit (see where rupees can and cannot be used). Other unit types have similar rules. Our ITFS booklet records that platform books of account are kept in US dollars. An Indian rupee account is permitted for administrative and statutory expenses under the FEMA (Deposit) Regulations, 2016, but not for transaction flows.
The guide gives two more examples. A treasury centre deals only in specified foreign currency. It may transact in a non-freely convertible currency where its group entities' underlying trade flows are in that currency, and in rupee derivatives only where the foreign-currency leg is freely convertible. An aircraft lessor deals only in specified foreign currency and may meet administrative expenses in rupees through a separate account. Check the framework for your own activity before setting up bank accounts and ledgers.
Currency matters for tax as well as for the regulator. Income received in Indian rupees is removed from eligible income in the section 147 report (Form No. 35), and the 9% minimum tax rates in section 206 apply only to a unit deriving its income solely in convertible foreign exchange. See Minimum alternate tax for IFSC units.
Company-law accounts
An IFSC entity incorporated in India prepares financial statements under the Companies Act, 2013 and the applicable Indian accounting standards. A branch of a foreign entity follows the rules for foreign companies and the IFSCA framework for its activity. Where the IFSC operation is one unit of a larger Indian company, keep separate books for the unit. Without them, neither the section 147 computation nor the accountant's certificate can be supported.
Where tax depends on the accounts
- Minimum alternate tax. Book profit starts from the statement of profit and loss, prepared under Schedule III to the Companies Act, 2013 or, for banking, insurance and some other companies, under their governing enactment (section 206(1)(f)). The accounting policies and standards must be the same as those in the accounts laid before the annual general meeting (section 206(1)(g)). An accountant certifies the computation (section 206(1)(s)).
- Section 147 deduction. The claim is supported by an accountant's report in Form No. 35 (section 147(4)(a)).
- Transfer pricing. An accountant's report is required for international and specified domestic transactions (section 172). See Transfer pricing for IFSC units in groups.
IFSCA reporting on top
Each IFSCA framework adds its own returns and filings. Examples from our booklets: an authorised FinTech Entity files audited financial statements with IFSCA within 30 days of signing, and a fund management entity's compliance calendar includes audited financial statements to IFSCA and the Registrar of Companies within six months of the year end. These sit alongside the income-tax return and transfer pricing filings. See regulatory returns and the compliance calendar.
Practical considerations
- Decide the functional currency, the currency of the books and the presentation of the statutory accounts at the outset, with the auditor.
- Appoint an auditor who can sign both the company-law audit and the tax reports (section 147, section 206 and section 172), and agree the timetable.
- Map IFSCA returns, the tax return and audit deadlines in a single calendar.