International Financial Services Centres Authority

## Policy Analysis Report: Notification Regarding International Financial Services Centres Authority, Gandhinagar **1. Executive Summary:** This report analyzes a notification issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, concerning the International Financial Services Centres Authority (IFSCA), Gandhinagar, Gujarat. The notification, effective January 11, 2022, and numbered S.O. 145(E), grants the IFSCA an exemption from income tax under Section 10(46) of the Income-tax Act, 1961, on specified income. Key findings include the specification of income types covered by the exemption, conditions attached to the exemption, and the retrospective application of the notification. This benefits the IFSCA financially by removing the tax burden on these income streams. **2. Introduction:** The purpose of this report is to provide an informative analysis of the notification issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, regarding income tax exemption for the International Financial Services Centres Authority, Gandhinagar. This analysis is based solely on the text of the provided notification. **3. Policy Overview:** This is a *new* policy specifying the income of the International Financial Services Centres Authority (IFSCA), Gandhinagar, that is exempt from income tax. * **Core Objective(s):** The core objective, inferred from the text, is to financially support the International Financial Services Centres Authority, Gandhinagar, by exempting specific income streams from income tax obligations, as granted under Section 10(46) of the Income-tax Act, 1961. **4. Background and Rationale:** As this is a new policy granting an exemption, the rationale appears to be to facilitate the operation and growth of the International Financial Services Centres Authority in Gandhinagar. By exempting specific income, the government aims to reduce the financial burden on the Authority, enabling it to focus resources on its core objectives as constituted under the International Financial Services Centres Authority Act, 2019. **5. Key Provisions / Changes:** This is a new policy, so the provisions define the tax exemption granted to the IFSCA. * **What the policy establishes/requires:** * Exemption from income tax under Section 10(46) of the Income-tax Act, 1961, for the International Financial Services Centres Authority, Gandhinagar. * Specifies the income covered by the exemption: * Grant-in-aid received from the Central Government. * Fees and charges received under the International Financial Services Centres Authority Act, 2019. * Any other sums received by the IFSCA as decided by the Central Government. * Interest income accrued on the above income streams. * Conditions for the exemption: * The IFSCA shall not engage in any commercial activity. * Activities and the nature of specified income shall remain unchanged throughout the financial years. * The IFSCA shall file a return of income in accordance with the provision of clause (g) of subsection (4C) of section 139 of the Income-tax Act, 1961. * The notification is applied retrospectively for the financial year 2020-2021 and shall apply with respect to the financial years 2021-2022, 2022-2023, 2023-2024 and 2024-2025. **6. Target Audience and Stakeholders:** The primary target audience and stakeholder is the International Financial Services Centres Authority (IFSCA), Gandhinagar, Gujarat. The policy directly affects its financial operations by exempting certain income from taxation. Also impacted are the Central Government (as the grantor of the income tax exemption) and potentially other entities involved in the financial activities within the International Financial Services Centres. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Board of Direct Taxes (CBDT) and the Ministry of Finance, Department of Revenue, are responsible for issuing and administering this notification. The IFSCA is responsible for adhering to the conditions stipulated for the exemption, including filing income tax returns. * **Timelines/Procedures:** The notification is effective from January 11, 2022, and applies retrospectively to the financial year 2020-2021 and prospectively to the financial years 2021-2022, 2022-2023, 2023-2024 and 2024-2025. The IFSCA is required to file income tax returns as per the specified clause of the Income-tax Act, 1961. **8. Expected Outcomes / Impact of Changes:** The intended outcome of this policy is to provide financial relief and support to the IFSCA by exempting specified income from taxation. This should allow the Authority to allocate more resources to its core functions and promote the development of international financial services in Gandhinagar. The impact will be a reduction in the IFSCA’s tax burden. This increased financial flexibility might encourage further investment and growth within the IFSCA. **9. Conclusion:** The notification analyzed provides a significant income tax exemption to the International Financial Services Centres Authority, Gandhinagar, on specific income streams, subject to certain conditions. This policy aims to bolster the Authority's financial position, facilitating its role in promoting international financial services. The retrospective application of the notification further enhances its impact, providing immediate financial benefit to the IFSCA.

Key Entities Referenced