SEZ - No TDS on Interest by IFSC Banking Units (IBUs)
SECTION 197A(1D) of the Income Tax Act provides that deduction is not required to be made by an Offshore Banking Unit on interest paid on deposit made on or after 1.4.2005 by a non-resident or a person not ordinarily resident in India, or on borrowing on or after 1.4.2005 from such persons. Clause (viii) of sub-section (15) of section 10 provides that such interest will not be included in the total income.
Offshore Banking Unit is defined in clause (u) of section 2 of the Special Economic Zones Act, 2005 as a branch of a bank located in a Special Economic Zone, which has obtained the permission under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949.
CBDT clarifies that in accordance with the provisions of Section 197A(1D) of the Income Tax Act, tax is not required to be deducted on interest paid by such IBUs, on deposit made on or after 1.4.2005 by a non-resident or a person who is not ordinarily resident in India, or on borrowings made on or after 1.4.2005 from such persons.
CBDT Circular No. 26/2016., Dated: July 04, 2016