GIFT IFSC further encouragement: Aircraft Leasing units of IFSC exempt from TDS on dividends paid among themselves; Sec 56(2)(x) not to apply on Funds relocated to Gift City; Investment funds

The volume of business activities in GIFT IFSC has seen notable growth across various sub-sectors of financial services. This is majorly due to Favourable taxation regime for funds set-up in GIFT IFSC comparable to the treaty jurisdictions, such as Singapore/ Mauritius. The Budget 2023 proposed to extend the time for tax-neutral relocation of funds from overseas jurisdictions into GIFT IFSC from the current 31 March 2023 by another two years. Now by an amendment to Rule 11UAC, Notification 51/2023 has expanded non-applicability of Sec. 56(2)(x) to include fund relocation to IFSC. Incase shares or units or interest in the resultant fund are received by the fund management entity of the resultant fund, in lieu of shares or units or interest held by the investment manager entity in the original fund, pursuant to the relocation, Sec 56(2)(x) shall not apply to the same. However, atleast 90% of shares or units or interest in the fund management entity of the resultant fund should be held by the same entity(ies) or person(s) in the same proportion as held by them in the investment manager entity of the original fund
and atleast 90% of the aggregate of shares or units or interest in the investment manager entity of the original fund should be held by such entity(ies) or person(s).

The Finance Act 2023 has introduced Section 10(34B) of the Income-tax Act. It exempts dividend income earned by an IFSC unit engaged in the aircraft leasing business from another IFSC unit engaged in the aircraft leasing business. Now vide N No 52/2023 the CBDT has notified the procedure wherein the payee shall Furnish a statement-cum-declaration in Form No. 1 to the payer giving details of PY in which the dividend income eligible for exemption under section 10(34B) of the Act is payable. The payer shall furnish the particulars of all the payments made to the recipient of such dividend on which tax has not been deducted in the TDS statement.

Further vide N No 49/2023, Exemption is provided to Investment funds regulated by IFSC Authority from the requirement of furnishing a return of income u/s 139(1) from assessment year 2019-20. Explanation of 'investment fund' is substituted in Notification No. 55/2019, dated the 26th July, 2019.

Already forex reserves in India has crossed $600 Bl. This move would bring in further forex for India.