An International Financial Services Centre (IFSC) provides financial services to residents and non-residents in currencies other than the Indian Rupee. To foster the growth of financial infrastructure, tax incentives have been provided to units operating within IFSC. These include exemptions and deductions for various sectors like offshore banking, aircraft and ship leasing, and insurance. The Finance Bill 2025 has extended the sunset dates for several tax incentives until March 2030. The Bill also introduces new provisions, such as tax exemptions on life insurance policy proceeds issued by IFSC insurance offices. Changes have also been made regarding treasury centres, allowing them to avoid deemed dividend provisions on loans or advances between group entities. Additionally, amendments to Section 9A provide relaxation for fund management activities in IFSC, allowing investment funds and their managers more flexibility to operate until March 2030.
Page Contents
- FAQ:- Incentives to IFSC in Budget 2025
- Q.1 What is International Financial Services Centre?
- Q.2 Why are tax incentives provided to International Financial Services Centre?
- Q.3 Whether there are sunset dates in provisions related to tax incentives for IFSC?
- Q.4 What changes as regards sunset dates have been introduced through amendment in Finance Bill?
- Q.5 What tax incentives have been brought in for life insurance policy from IFSC Insurance offices?
- Q.6 What exemptions are provided to aircraft leasing units in IFSC?
- Q.7 What exemptions have been provided to ship leasing units in IFSC in the current Finance Bill 2025?
- Q.8 What kind of payment is deemed as dividend?
- Q.9. What is a treasury centre? How is it relevant to units in IFSC?
- Q.10. What amendment is carried out for treasury centres in IFSC?
- Q.11. What are the provisions of section 9A of the Income-tax Act, 1961?
- Q.12. What is safe harbour? What are the changes made in proposed bill in context of safe harbour?
- Q.13 What amendments have been carried out in the current Bill in section 9A of the Income-tax Act,1961?
- Q.14. What grace period is provided in case the proposed condition at (c) is not satisfied?
FAQ:- Incentives to IFSC in Budget 2025
Q.1 What is International Financial Services Centre?
Ans. International Financial Services Centre (IFSC) is a jurisdiction that provides financial services to non-residents and residents, to the extent permissible under the current regulations. However, such financial services should involve transaction in any currency except Indian Rupee. The International Financial Services Centre (IFSC) has the same meaning as in Section 2(q) of the Special Economic Zone, Act 2005.
Q.2 Why are tax incentives provided to International Financial Services Centre?
Ans. In order to promote the development of world-class financial infrastructure in India, several tax concessions have been provided to units located in IFSC (exemptions, deductions or relocation of funds to IFSC, under the Income-tax Act, 1961) over the past few years.
Ans. Yes, under the existing provisions there are sunset dates such as 31.03.2024, 31.03.2025 or 31.03.2026 for various tax incentives provided to IFSC. However, in Finance Bill 2025, sunset dates for commencement of operation have been extended in all cases.
Q.4 What changes as regards sunset dates have been introduced through amendment in Finance Bill?
Ans. The sunset dates for commencement of operations of IFSC units for several tax concessions, or relocation of funds to IFSC, etc. is proposed to be extended to 31st day of March, 2030. The sunset dates have been revised in following sections:-
| Section | Brief Description |
| 80LA(2)(d) | Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre. |
| 10(4D) | Exemption to certain incomes including income on transfer of assets as per section 47(viiab) |
| 10(4F) | Exemption to income of a non-resident by way of royalty or interest, on account of lease of an aircraft or a ship, paid by a unit of IFSC |
| 10(4H) | Exemption to income of a non-resident or a unit of IFSC, engaged primarily in the business of leasing, by way of capital gains arising from the transfer of equity shares of domestic company, being a unit of IFSC |
| 47(viiad) | Transactions which are not regarded as transfers for the purposes of capital gains as provided in section 45 |
Q.5 What tax incentives have been brought in for life insurance policy from IFSC Insurance offices?
Ans. Clause (10D) of section 10 is proposed to be amended so as to provide that proceed received on life insurance policy, issued by insurance intermediary office located in IFSC, shall be exempted without any condition on premium amount (i.e. Rs. 2,50,000 for ULIPs and Rs. 5,00,000 for other policies). However, the premium payable for any of the year during the term of policy should not be more than 10 percent of the actual capital sum assured.
Q.6 What exemptions are provided to aircraft leasing units in IFSC?
Ans. Exemption on capital gains tax is provided to non-residents or unit of IFSC (being engaged in aircraft leasing) on transfer of equity shares of domestic companies (being units of IFSC) who are also engaged in aircraft leasing [Section 10(4H)].
Further, exemption is provided on dividend paid by a company (being a unit of IFSC) engaged in aircraft leasing, to another unit of IFSC who is also engaged in aircraft leasing.
Q.7 What exemptions have been provided to ship leasing units in IFSC in the current Finance Bill 2025?
Ans. Exemption provided to aircraft leasing units on capital gains under Section 10(4H) and dividend under Section 10(34B) have been extended to ship leasing units in IFSC as well.
Q.8 What kind of payment is deemed as dividend?
Ans. Deemed dividend is defined in sub-clause (e) of clause (22) of section 2. Deemed dividend inter alia includes any sum by way of advance or loan to a shareholder paid by a company, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest or any payment by any such company on behalf, or for the individual benefit, of any such shareholder.
Q.9. What is a treasury centre? How is it relevant to units in IFSC?
Ans. A treasury center of an entity or a group enables it to centralise and concentrate cash and risk management to gain economies of scale, process efficiencies, and tighter control of cash flow in the group. The establishment of a treasury centre in the IFSC allows corporations to manage their global treasury operations such as foreign exchange and risk management, asset management, and advisory related to mergers and acquisitions etc.
Q.10. What amendment is carried out for treasury centres in IFSC?
Ans. Under the present provision, deemed dividend would be applicable to Treasury centres. Finance Bill proposes that the provisions of deemed dividend shall not apply to Treasury centres in IFSC on any advance or loan between two group entities, –
a. where one of the group entity is a “Finance company” or a “Finance unit” in IFSC set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services; and
b. the parent entity or principal entity of such group is listed on stock exchange in a country or territory outside India, (other than that as specified by the Board).
Q.11. What are the provisions of section 9A of the Income-tax Act, 1961?
Ans. Section 9A of the Act provides that fund management activities carried out through an eligible fund manager in case of eligible investment fund, shall not constitute business connection of the said fund in India. Conditions for eligible investment fund and eligible fund manager have been provided respectively in section 9A(3) and section 9A(4).
Q.12. What is safe harbour? What are the changes made in proposed bill in context of safe harbour?
Ans. A safe harbor is a regime wherein for an assessee that fulfils specific conditions as prescribed, the conduct or transactions of such an assessee may be accepted.
In the proposed Bill, the condition for residency in respect of aggregate participation or investment in the eligible investment fund of a resident under clause (c) of section 9A has been relaxed.
Q.13 What amendments have been carried out in the current Bill in section 9A of the Income-tax Act,1961?
Ans. Condition at clause (c) of section 9A is being relaxed for all the investment funds whether or not its fund manager is located in IFSC, by determining the aggregate participation or investment in the fund as on the 1st day of April and the 1st day of October of the previous year.
Further, all conditions other than (c) can be relaxed by the Central Government for investment fund whose fund manager located in IFSC commences operations before 31.03.2030. This date was earlier 31.03.2024
Q.14. What grace period is provided in case the proposed condition at (c) is not satisfied?
Ans. In case the condition at clause (c) of section 9A is not satisfied on either of the said dates, a grace period is provided to satisfy the same condition within four months of the said dates.
