Applicable to: Banks/Financial Institutions operating in IFSCs (e.g., GIFT City)
This section provides 100% tax exemption for 10 years on specified incomes to promote India’s financial hubs.
Key Features (AY 2025-26)
1. Eligible Entities
✅ Offshore Banking Units (OBUs) of Indian/foreign banks
✅ IFSC Units in GIFT City (Insurance, FinTech, Fund Mgmt.)
2. Deduction Details
| INCOME TYPE | DEDUCTION | PERIOD |
| Eligible Business Income | 100% | First 5 years |
| Next 5 Years | 50% | Years 6-10 |
| Capital Gains | 100% | Full 10Y |
3. Qualifying Conditions
- Must obtain IFSCA approval
- Maintain separate books for IFSC operations
- MAT exemptionavailable (Section 115JB)
Illustrative Example
Case: Foreign Bank OBU in GIFT City
- Year 1-5 Profit:₹200 crore/year → Tax Saved: ₹60 crore/year
- Year 6-10 Profit:₹300 crore/year → Tax Saved: ₹45 crore/year
- Total 10Y Benefit:₹525 crore
Comparison with Similar Sections
| SECTION | FOCUS | BENEFIT |
| 80LA | IFSC/OBUs | 100% (5Y) + 50% (5Y) |
| 80-IAC | Startups | 100% (3Y) |
| 10(4D) | IFSC Bonds | Interest tax-free |
Pro Tips for Compliance
- Pre-approve Activitieswith IFSCA to ensure eligibility
- Segregate IFSC Transactionsfrom domestic operations
- Monitor 10-Year Timelinefrom commencement date
FAQs
Q: Can Indian retail banks claim this?
A: Only for OBU operations, not domestic banking.
Q: Are derivatives trading incomes covered?
A: Yes, if traded through IFSC exchanges.
Q: Is GST exemption available?
A: Yes, IFSC units get GST exemptions too.
Section 80LA makes IFSCs like GIFT City highly attractive for global financial firms. To maximize benefits:
- Time incorporationto align with profit cycles
- Leverage MAT exemption
- Combine with IFSC-specific customs/GST benefits
