The two notifications
| Notification | Date | Covers | In force |
|---|---|---|---|
| No. 80/2026, S.O. 3743(E) | 10 July 2026 | Specified receipts of fourteen classes of IFSC unit (table below) | Deemed from 1 April 2026 |
| No. 75/2026, S.O. 3610(E), F. No. 275/18/2026-IT(B) | 3 July 2026 | Lease rent or supplemental lease rent for lease of a ship, paid to an IFSC unit lessor | Deemed from 1 April 2026 |
Both are made under section 400(1) read with section 147 of the 2025 Act. They displace deduction under section 393, the withholding provision of the 2025 Act. The explanatory memorandum to Notification 75/2026 certifies that the retrospective effect adversely affects no one.
Payments covered by Notification 80/2026
| IFSC unit (payee) | Receipts on which no tax is deducted |
|---|---|
| Banking Unit | Interest on external commercial borrowings or loans; professional fees; referral fees; brokerage income; commission on factoring and forfaiting services |
| IFSC Insurance Intermediary Office | Insurance commission |
| Finance Company | Interest on external commercial borrowings or loans; dividend income; commission on factoring and forfaiting services |
| Finance Unit | Interest on external commercial borrowings or loans; dividend income; commission on factoring and forfaiting services |
| Fund management entity | Professional fee |
| Broker dealer | Dividend |
| Investment adviser | Investment advisory fee |
| Registered distributor | Distribution fee and commission fee |
| Custodian | Professional fee; commission fee |
| Credit rating agency | Credit rating fee |
| Investment banker | Investment banker fee |
| Debenture trustee | Trusteeship fee |
| International Trade Finance Service (ITFS) | Commission income |
| FinTech Entity | Technical fee or professional fee; commission income |
Each class takes its meaning from the IFSCA regulation or circular named in the notification: the Banking Regulations, 2020, the Insurance Intermediary Regulations, 2021, the Finance Company Regulations, 2021, the Capital Market Intermediaries Regulations, 2021, the Fund Management Regulations, 2022, and the IFSCA circulars of 9 July 2021 (ITFS) and 27 April 2022 (FinTech). The payee must be registered under the relevant regulation or circular, and the services must be financial services under them. A payment for anything else, or to an unregistered entity, is outside the notification.
Ship lease rent: Notification 75/2026
A lessee paying lease rent or supplemental lease rent to an IFSC unit for the lease of a ship need not deduct tax under section 393(1) (Table S. No. 2). "Ship" has the meaning in Schedule VI (Note 3), which includes an ocean vessel, its engine and parts. See ship leasing.
The treatment of aircraft lease rentals is not established from the notifications we have read. Aircraft lessors should not assume equivalent relief without a specific notification. See aircraft leasing.
Conditions and procedure
- The IFSC unit gives the payer a statement-cum-declaration in Form No. 1(N). The form shows the twenty consecutive tax years for which the unit opts to claim the section 147 deduction, the permission or registration that fixes the relevant tax year, and the initial tax year of the claim. It is furnished and verified for each tax year of the twenty and signed by a person competent to sign the unit's return under section 265.
- The payer stops deducting on payments made or credited after it receives the copy of the form.
- The payer reports every payment made without deduction in its TDS statement under section 397(3)(b), read with rule 219 of the Income-tax Rules, 2026.
- Outside the declared twenty years, the payer must deduct tax as usual.
Practical points
- Payments made or credited before the payer receives the form are not covered. Send Form No. 1(N) at the start of each tax year, before the first invoice.
- Use the same twenty years in Form No. 1(N) and in the section 147 claim in the return. See The section 147 deduction.
- Declarations given under the 1961 Act regime referred to section 80LA and a ten-year period. Replace them with Form No. 1(N) for tax year 2026-27 onward.
- Payers should keep the form with their TDS records. The relief rests on it.