Where the reliefs sit
Under the Income-tax Act, 2025, most investor-level reliefs for the IFSC are in Schedule VI, read with section 11. The Schedule is headed "Income not to be included in total income of certain eligible persons in International Financial Services Centre or having income therefrom". Each entry names the income, the eligible person and the conditions. One relief sits in section 70(1)(r): a transfer listed there is outside the capital gains charge altogether.
These replace the separate clauses of section 10 and section 47 of the 1961 Act that older materials cite.
The main reliefs
| Income | Who benefits | Key conditions |
|---|---|---|
| Gains on transfer on a recognised stock exchange in an IFSC of bonds or Global Depository Receipts referred to in section 209(1), rupee-denominated bonds of an Indian company, derivatives, or other notified securities | Non-resident | Consideration paid or payable in foreign currency (section 70(1)(r)) |
| Income from a specified fund, or on transfer of its units | Unit holder of a specified fund | None beyond the fund qualifying (Schedule VI, Sl. No. 9) |
| Income from transfer of non-deliverable forwards, offshore derivative instruments or over-the-counter derivatives, and distributions on them | Non-resident | Entered into with an Offshore Banking Unit of an IFSC or an IFSC-unit Foreign Portfolio Investor, plus prescribed conditions (Sl. No. 5) |
| Interest payable by an IFSC unit on money borrowed on or after 1 September 2019 | Non-resident | Sl. No. 12 |
| Royalty or interest on lease of an aircraft or ship paid by an IFSC unit | Non-resident | Unit commenced operations by 31 March 2030 (Sl. No. 6) |
| Income from a portfolio managed by an IFSC portfolio manager on the investor's behalf | Non-resident | Received in an account with an Offshore Banking Unit in an IFSC, and only to the extent it accrues outside India (Sl. No. 7) |
| Capital gains on transfer of shares of an IFSC company primarily engaged in aircraft or ship leasing | Non-resident or IFSC unit | Company commenced operations by 31 March 2030, and gains arise within the ten-year windows in Sl. No. 8 |
| Capital gains on shares transferred into an IFSC fund on relocation | Non-resident or specified fund | Relocation as defined, and the gains would not have been taxable without it (Sl. No. 10) |
A specified fund (Schedule VI, Note 1(g)) is broadly an IFSC fund registered as a Category III Alternative Investment Fund, or certified as a retail scheme or an Exchange Traded Fund under the IFSCA (Fund Management) Regulations, 2022, whose units are held by non-residents other than the sponsor or manager. The Finance Act, 2026 recast the exception for holders who later become resident: their units must not exceed 5% of the units issued, and other prescribed conditions apply. For fund-level relief on relocation, see fund relocation.
Dividends from IFSC companies
Dividends are not exempt in the shareholder's hands under the provisions above, except dividends from an IFSC aircraft or ship leasing company to another IFSC unit (Sl. No. 11). For a non-resident (not being a company) or a foreign company, section 207 sets a rate of 10% on dividends received from a unit in an IFSC, against 20% for other dividends. A tax treaty may reduce this further.
Using a tax treaty
A non-resident can claim relief under a tax treaty only if it obtains a certificate of residence from the government of its country or territory and provides the other prescribed documents and information (section 159(8)). Obtain the certificate before the first payment and renew it each year. Where an exemption in Schedule VI applies, the treaty question may not arise. Where it does not, the treaty rate is often the fallback.
In practice
- Confirm the instrument. Check that the instrument, venue, currency and counterparty fit the exact entry you rely on. A rupee-settled trade, an off-exchange transfer or a fund with resident investors above the threshold can fall outside it.
- Watch the sunset dates. Several entries depend on commencement by 31 March 2030.
- Residents are different. Indian residents investing in IFSC products under the Liberalised Remittance Scheme are taxed in India on their worldwide income. The non-resident reliefs above do not help them. See residents and the LRS.
- Home-country tax. An Indian exemption does not settle the investor's tax at home. Take advice there too.