Tax Interface Master — Section 10(4D), 80LA and GAAR

The Income-tax Act concessions specific to IFSC units, and where the general anti-avoidance rule still applies.

Section 10(4D) — exemption for specified funds

Certain income of a "specified fund" (broadly, a Category III AIF or similar investment vehicle located in an IFSC meeting notified conditions) attributable to units held by non-resident investors is exempt — the exact conditions (resident-investor participation cap, income type) must be checked against the current notification before relying on the exemption for a specific fund structure.

Section 80LA — deduction for IFSC units

A unit in an IFSC (banking, insurance or other eligible unit) can claim a profit-linked deduction under Section 80LA for a specified number of consecutive assessment years out of a longer eligibility window, subject to filing conditions (audit report, return filed on time) — this is a deduction from computed profits, not a blanket income exemption, so the underlying profit computation still matters.

GAAR and treaty-shopping scrutiny

IFSC tax concessions do not switch off the General Anti-Avoidance Rule — a fund or structure routed through GIFT City purely to access a tax benefit without commercial substance in the IFSC (genuine staff, decision-making, operations) remains exposed to GAAR recharacterisation; documented substance is the practical safeguard, not the IFSC address alone.

GST and customs treatment

An IFSC unit, being inside a notified SEZ, generally receives supplies as zero-rated and its own qualifying supplies to other SEZ/IFSC units can likewise be zero-rated under the IGST Act's SEZ provisions — but supplies to the domestic tariff area are treated as ordinary imports into India for GST/customs purposes, so a mixed IFSC-DTA business model needs transaction-by-transaction classification.

← Entry Route Selection Master · SEZ–IFSC Interface Master →