Easing compliance for IFSC units: A regulatory breakthrough
Easing compliance for IFSC units: A regulatory breakthrough
Over the last couple of years, India’s maiden International Financial Services Centre (IFSC) in GIFT City has evolved significantly. The regulators are putting in their best efforts to ensure a smooth ride for the entities set up in the GIFT city by providing opportunities not only for Indian entities but also for offshore business houses to be able to function as an integrated hub for financial and technological services.
A plethora of announcements have been made by the CBDT, not only during annual budgets but also on a real-time basis to make the IFSC more lucrative and ease the compliance burden for investors and corporates undertaking their operations there.
The CBDT issued a notification to facilitate the process of reporting remittances for units located in IFSCs and to streamline tax compliance. Under the existing provisions of the Indian tax laws, a person responsible for paying a non-resident has to report such payments under the filings prescribed under Rule 37BB of the Income-tax Rules, 1962. Part D of Form 15 CA of the Rules covers payments which are not chargeable to tax under the provisions of the Indian tax laws. W.e.f 1 January 2024, the IFSC units will no longer be required to furnish such Part D of Form 15CA while making non-taxable remittances.
Henceforth, IFSC units will have to submit a quarterly statement in Form 15CD, detailing all remittances made to non-residents or foreign companies. The form is similar to the existing Form 15CC which is required to be filed by the Authorised Dealers providing details of foreign remittances.
The key amendments made in the aforesaid notification are broadly summarised below:
Introduction of Form No. 15CD: A new Form, “Form No. 15CD”, is introduced. This form is to be filed electronically by units located in IFSCs to report their remittances. The said form includes detailed fields for providing information about the unit, remittee, remitter, currency details, and others.
Quarterly Statement Requirement: Units located in IFSCs must now furnish a quarterly statement for each quarter of the financial year. This statement covers all remittances and must be submitted within fifteen days from the end of the respective quarter. The reporting must be done electronically under a digital signature on the income tax portal. From the March 24th quarter (i.e., the quarter ending in January to March 2024), the due date for e-filing would be 15 April 2024.
Role of Principal Director General of Income-tax (Systems) and Director General of Income-tax (Systems): These authorities will specify the procedures, formats, and standards for the furnishing and verification of various forms, including Form No. 15CA, Form No. 15CB, Form No. 15CC, and the newly introduced Form No. 15CD.
Explanation: The notification includes an explanation that defines terms such as “authorised dealer,” “International Financial Services Centre,” and “Unit” for clarity and interpretation. The changes outlined in this amendment will take effect from 1 January 2024. All units of IFSCs must ensure compliance with these new reporting requirements.
The CBDT’s amendment to rule 37BB and the introduction of Form No. 15CD represent a significant step in robust reporting and compliance in the realm of tax regulations for entities undertaking business from IFSCs. With this added compliance responsibility requirement for units in IFSCs, the regulator wants to streamline and standardise the tax reporting process and ensure transparency.
An aspect worth noting in the amendments is that the form requires the PAN\Aadhaar of remittee and also the PAN of the remitter in the Form. Recently there have been relaxations made for certain non-resident cases for PAN requirements. One needs to wait for the e-filing utility to see how this situation is managed.
This is indeed a welcome move and another step in the direction of showcasing the intent to make IFSC Gift City one of the preferred jurisdictions to make investments and be competitive among the world’s leading IFSCs.
All in all, one more stroke by the Indian government will instil confidence in the investors and corporates sitting on the fence to choose the Indian IFSC as an alternative investment jurisdiction.
Source : ETinsights