New rule to avoid tax deduction on purchases through IFSC sellers
The Ministry of Finance has introduced a new tax rule, effective January 1, 2025, allowing buyers to avoid tax deduction on purchases made from sellers operating within the International Financial Services Centres (IFSC).
This change simplifies the tax deduction process, provided buyers follow specific guidelines.
Under the new regulation, sellers must submit a declaration detailing the previous years for which they are claiming tax deductions. This declaration must be in the prescribed format and verified according to the government’s guidelines.
Once buyers receive this declaration from sellers, they will not be required to deduct tax on payments made to them.
"... the seller shall - (i) furnish a statement-cum-declaration in the format provided in Form No. 1 annexed to notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) number S.O. 1135(E), dated the 7th March, 2024 (hereinafter referred to as the said form) to the buyer giving details of previous years relevant to the ten consecutive assessment years for which the seller opts for claiming deduction under subsections (1A) and (2) of section 80LA of the said Act; and (ii) such statement-cum-declaration so furnished shall be verified in the manner specified in the said Form, for each previous year relevant to the ten consecutive assessment years for which the seller opts for claiming deduction under subsections (1A) and (2) of section 80LA of the said Act," the notification said.
