Section 80LA(1A)

Section 80LA(1A) — the law in short

What the courts have decided on section 80LA(1A), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — section 80LA: a unit in an IFSC gets one hundred per cent for ten consecutive years out of fifteen, at its option CBDT Circulars & InstructionsCuts both ways
  My client has set up a unit in GIFT City. What exactly is the section 80LA deduction, how long does it last, and what has to go with the return?
  Section 80LA(1A) allows a Unit of an International Financial Services Centre a deduction of one hundred per cent of the income referred to in section 80LA(2), for any ten consecutive assessment years, at the option of the assessee, out of fifteen years beginning with the assessment year relevant to the previous year in which the permission or registration was obtained. The permission or registration counted for that starting point is one under clause (a) of section 23(1) of the Banking Regulation Act 1949, or under the Securities and Exchange Board of India Act 1992, or under the International Financial Services Centres Authority Act 2019.
• Statutory position — section 10(4D): what a specified fund in an IFSC is exempt on, and how much of it survives the non-resident test CBDT Circulars & InstructionsCuts both ways
  Our Category III AIF is registered in GIFT City and some of its unit holders are Indian residents. What exactly is exempt under section 10(4D)?
  Section 10(4D) exempts income of a specified fund of four described kinds — income from the transfer of a capital asset referred to in section 47(viiab) on a recognised stock exchange located in an IFSC where the consideration is paid or payable in convertible foreign exchange; income from the transfer of securities other than shares in a company resident in India; income from securities issued by a non-resident, not being a permanent establishment of a non-resident in India, where that income does not otherwise accrue or arise in India; and income from a securitisation trust chargeable under the head 'Profits and gains of business or profession'. Crucially, the exemption runs only 'to the extent such income accrued or arisen to, or is received, is attributable to units held by non-resident (not being the permanent establishment of a non-resident in India) or is attributable to the investment division of offshore banking unit', computed in the prescribed manner.
• Statutory position — section 10(4E), (4F), (4G) and (4H): the derivatives, aircraft and ship leasing, portfolio and share-transfer exemptions for an IFSC CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  Beyond section 10(4D), what other income connected with an IFSC unit is exempt — particularly on aircraft leasing and on derivatives written by an offshore banking unit?
  Four further clauses of section 10 do the work. Clause (4E) exempts a non-resident's income from the transfer of non-deliverable forward contracts, offshore derivative instruments or over-the-counter derivatives, and from distribution of income on offshore derivative instruments or over-the-counter derivatives, where entered into with an offshore banking unit of an IFSC referred to in section 80LA(1A); a Foreign Portfolio Investor being a unit of an IFSC is added as a counterparty only with effect from 1 April 2026. Clause (4F) exempts a non-resident's royalty or interest on the lease of an aircraft or a ship paid by a unit of an IFSC that has commenced operations on or before 31 March 2030; clause (4G) exempts a non-resident's income from a portfolio of securities, financial products or funds managed by a portfolio manager in an account maintained with an Offshore Banking Unit in an IFSC, to the extent it accrues or arises outside India and is not deemed to accrue or arise in India; and clause (4H) exempts capital gains on the transfer of equity shares of a domestic company that is an IFSC unit engaged primarily in aircraft or ship leasing, within a ten-year window.
• Statutory position — section 47(viiac) and (viiad): relocating an offshore fund into an IFSC is not a transfer, if it is done by 31 March 2030 CBDT Circulars & InstructionsCuts both ways
  We want to move an offshore fund's assets into a GIFT City vehicle and issue units in the new fund to the existing investors. Does that trigger capital gains, either for the fund or for the investors?
  Not if it is a 'relocation' as the Act defines it. Section 47(viiac) provides that any transfer, in a relocation, of a capital asset by the original fund to the resulting fund is not regarded as a transfer for the purposes of section 45; section 47(viiad) does the same for any transfer by a shareholder, unit holder or interest holder, in a relocation, of a capital asset being a share, unit or interest held by him in the original fund in consideration for a share, unit or interest in the resultant fund. The two clauses therefore cover both legs — the fund's transfer of its assets and the investors' exchange of their holdings.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.