Introduction: The Ministry of Finance, Department of Economic Affairs, Financial Market Division, has issued a significant notification on January 18, 2024, expanding the spectrum of financial services under the International Financial Services Centres Authority Act, 2019.
Detailed Analysis: The notification outlines four newly notified financial services:
1. Book-keeping services: These services encompass maintaining accurate and up-to-date financial records, ensuring transparency and compliance.
2. Accounting services: Covering a broad range, accounting services involve the systematic recording, analysis, and interpretation of financial transactions.
3. Taxation services: This includes assistance in tax-related matters, aiming to optimize tax liabilities and ensure adherence to regulatory frameworks.
4. Financial crime compliance services: Addressing Anti-Money Laundering (AML) / Countering the Financing of Terrorism (CFT) measures and complying with Financial Action Task Force (FATF) recommendations.
The notification emphasizes that these financial services must be provided by units within International Financial Service Centres, ensuring non-residents are not involved in splitting, reconstructing, or reorganizing existing businesses in India. Additionally, these units are prohibited from transferring or receiving services through existing contracts or work arrangements from their group entities in India.
The term “non-resident” is clarified as per the Foreign Exchange Management Act, 1999, extending to individuals residing outside India, including units in International Financial Service Centres.
Conclusion: This notification reflects the government’s commitment to expanding and regulating financial services within International Financial Service Centres. The focus on preventing misuse through stringent criteria ensures the services cater exclusively to non-residents, promoting the integrity of the Indian financial ecosystem. This development is poised to have a far-reaching impact on the financial landscape, fostering transparency, compliance, and international collaboration.
***
MINISTRY OF FINANCE
(Department of Economic Affairs)
(FINANCIAL MARKET DIVISION)
NOTIFICATION
New Delhi, the 18th January, 2024
S.O. 291(E).—In exercise of the powers conferred by sub-clause (xiv) of clause (e) of sub-section (1) of section 3 of the International Financial Services Centres Authority Act, 2019 (50 of 2019), the Central Government hereby notifies the following as financial services, namely:-
1. book-keeping services;
2. accounting services;
3. taxation services; and
4. financial crime compliance services:
Provided that the financial services shall be offered by units in an International Financial Service Centre regulated by the International Financial Services Centres Authority, to non-residents whose business is not set up either by –
(i) splitting up of business already in existence in India; or
(ii) reconstructing of business already in existence in India; or
(iii) reorganising of a business already in existence in India:
Provided further that the units shall not offer the services by way of transferring or receiving of existing contracts or work arrangements from their group entities in India.
Explanation. – For the purpose of this notification –
(a). “financial crime compliance services” shall include services rendered in relation to compliances of Anti-Money Laundering (AML) / Countering the Financing of Terrorism (CFT) measures and Financial Action Task Force (FATF) recommendations, and other related activities;
(b). A “non-resident” shall mean person resident outside India under Foreign Exchange Management Act, 1999 (42 of 1999) and shall also include units in International Financial Service Centre .
[F. No. 3/15/2022-EM]
SURBHI JAIN, Jt. Secy.
