Understanding Notification No. 6/2025: TCS Exemptions for IFSC Units

Overview of Notification No. 6/2025 Regarding IFSC Units and TCS Exemptions

The Ministry of Finance has issued Notification No. 6/2025, which outlines specific exemptions for International Financial Services Centre (IFSC) units under the Income-tax Act, 1961 (Act). This notification provides these units a reprieve from being classified as buyers according to Section 206C(1H), exempting them from Tax Collection at Source (TCS) when purchasing goods from sellers, subject to meeting specific conditions.

Key Provisions of the Notification

Eligibility Requirements:
- Submission of Form 1A: IFSC units must submit a statement-cum-declaration in Form 1A to the seller. This form includes details about the previous years relevant to the ten consecutive assessment years for which the buyer claims deductions under subsections (1A) and (2) of Section 80LA.
- Verification: The declaration must be validated as specified within the form for each relevant previous year.
Seller's Obligations:
- TCS Collection: Upon receiving Form 1A, sellers are not required to collect TCS on payments made by the buyer.
- Reporting: Sellers must include details of all payments received, which fall under this exemption, in their TCS statement as outlined in sub-section (3) of Section 206C and Rule 31AA of the Income-tax Rules, 1962.
Timeframe for Relaxation:
- The TCS exemption applies only during the declared ten-year period as specified by the buyer in Form 1A. Sellers must collect TCS for transactions that occur outside this period.
Definitions:
- Buyer: Defined as an International Financial Services Centre Unit as per sub-clauses (a) and (d) of the Explanation to Section 80LA.
- Key Terms:
  - International Financial Services Centre: As defined in clause (q) of Section 2 of the Special Economic Zones Act, 2005.
  - Seller: Defined under clause (b) of the Explanation to sub-section (1H) of Section 206C.
  - Unit: As per clause (zc) of Section 2 of the Special Economic Zones Act, 2005.
Data Security Measures:
- The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) will establish procedures and standards for secure data handling, including the capture and transmission of data and document uploads.

Effective Date

This notification is applicable from January 1, 2025.

Form No. 1A Template

The following details are required in Form No. 1A which is to be filled out by the IFSC unit (buyer) and submitted to the seller:

Assessee Name:
Permanent Account Number:
Unit's Name and Address:
Authorization Date under relevant sections of the Banking Regulation Act, 1949, Securities and Exchange Board of India Act, 1992, or the International Financial Services Centres Authority Act, 2019.

Statement-Cum-Declaration

The declarant must verify the accuracy of the details provided and certify their eligibility for the deductions as specified in Section 80LA.

Signature Requirement

This declaration should be signed by an authorized person as defined in Section 140 of the Income-tax Act.