It can, on eligible income. Whether it does depends on the tax regime the company has chosen and whether its income qualifies.
Potentially nil tax on eligible IFSC income
The deduction applies, but MAT can leave a bill
Put numbers to both routes in the FME tax route calculator
| Section 200 regime | Default regime | |
|---|---|---|
| Deduction on eligible IFSC income | Up to 100%, subject to conditions | Up to 100%, subject to conditions |
| Minimum alternate tax | Does not apply | Applies if tax is below 9% of book profit (IFSC unit) |
| Other income | 22% plus surcharge and cess | Default rules |
| Can the choice be reversed? | No | The company can opt for section 200 later |
The deduction is section 147, with its period in sub-section (2)(b) and the qualifying income in sub-section (3). The 22% option is section 200; sub-section (4) keeps the deduction for an IFSC unit and sub-section (6) makes the option final. Minimum alternate tax and its exclusions are in section 206.
147. (1) Where the following assessee has any income of the nature referred to in sub-section (3), there shall be allowed a deduction equal to 100% of such income:— (a) a scheduled bank, or a bank incorporated under the laws of a country outside India, and having an Offshore Banking Unit in a Special Economic Zone; or (b) a unit of an International Financial Services Centre.
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(b) in the case of an entity mentioned in sub-section (1)(b), for twenty consecutive tax years out of twenty-five years beginning from the relevant tax year, at the option of an assessee.]
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(3) The income referred to in sub-section (1) shall be the income from— (a) an Offshore Banking Unit located in a Special Economic Zone; or (b) the business activities referred to in section 6(1) of the Banking Regulation Act, 1949 (10 of 1949), with undertakings in a Special Economic Zone or entities that develop, develop and operate, or develop, operate and maintain Special Economic Zone; or (c) the approved business activities of any Unit of an International Financial Services Centre set up in a Special Economic Zone; or (d) transfer of an asset being, an aircraft or a ship, leased by a unit referred to in clause (c) if such unit commenced its business operations by 31st March, 2030.
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
200. (1) Irrespective of anything contained in this Act but subject to the provisions of Parts A, B, E and this Part (other than sections 199 and 201) of this Chapter, the income-tax payable for a tax year shall be at the rate of 22%, at the option of a person being a domestic company, in respect of the total income of such person computed in the following manner:— (a) without any deduction under— (i) section 45(2) or 47(1)(b); or (ii) Chapter VIII other than provisions of section 146 or 148; or (iii) sections specified in section 205(1)(a) to (g);
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(4) In case of a person, having a Unit in the International Financial Services Centre, which has exercised option under sub-section (5), the requirements contained in sub-section (1) shall be modified to the extent that the deduction as referred to in section 147 shall be available to such Unit subject to fulfilment of the conditions contained in that section.
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(6) Once the option under this section has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year.
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(b) For the purposes of clause (a), the expressions “minimum alternate tax” means the amount of tax computed on the book profit— (i) in case of a company being a unit located in an International Financial Services Centre and deriving its income solely in convertible foreign exchange, at the rate of 9%; (ii) in case of any other company, at a rate of [14%].
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(q) The provisions of this [sub-section] shall not apply to a person,— (i) being a company having income accruing or arising from life insurance business referred to in section 194(1) (Table: Sl. No. 6); or (ii) who has exercised the option under section 200(5) or section 201(2).
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(2) (a) Irrespective of anything contained in this Act, where the regular income-tax payable for a tax year by a person, other than a company, is less than the alternate minimum tax payable for such tax year, then,— (i) the adjusted total income shall be deemed to be the total income of that person for such tax year; and (ii) he shall be liable to pay income-tax equal to the alternate minimum tax.
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
(b) For the purposes of this sub-section,— (i) “adjusted total income” shall be the total income before giving effect to clause (a), as increased by deductions claimed, if any, under— (I) any section (other than section 149) included in Chapter VIII-C; (II) section 46 as reduced by depreciation allowable as per the provisions of section 33, as if no deduction was allowed in respect of the assets on which the deduction under that section is claimed; (ii) “alternate minimum tax” means the amount of tax computed on adjusted total income,— (I) in case of an assessee being a unit located in an International Financial Services Centre and deriving its income solely in convertible foreign exchange, at the rate of 9%; (II) in case of an assessee being a co-operative society, at the rate of 15%; (III) in any other case, at a rate of 18.5%; (iii) “regular income-tax” means the income-tax payable for a tax year by a person on his total income in accordance with the provisions of this Act other than the provisions of this sub-section; (iv) “Unit” means a unit established in an International Financial Services Centre. (c) The provisions of this sub-section shall apply to a person who has claimed any deduction under any section (other than section 14992) included in Chapter VIII-C or section 46. (d) The provisions of this sub-section shall not apply to— (i) a person, who has exercised the option under section 203(5) or section 204(2); (ii) a person, whose income-tax payable in respect of the total income of such person is computed under section 202(1); (iii) an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person referred to in section 2(77)(g), if the adjusted total income of such person does not exceed twenty lakh rupees; or (iv) any specified fund referred to in Schedule VI (Note 1).
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
Checked against the Income-tax Act, 2025 as amended by the Finance Act, 2026 on 24 October 2026. Official text of the Act
The outcome depends on the company’s structure, its income, where it is in its deduction period and its tax election.
Meet the expert
Company Secretary & Compliance Officer
Global Horizons Capital Advisors (IFSC) Private Limited — an IFSCA-licensed investment banker
Published in The Chartered Accountant (Jun 2025, Jan 2025, Mar 2024) and Chartered Secretary (Aug 2023)
Prashant Kumar is a seasoned Company Secretary and corporate governance strategist with more than 13 years of experience advising large corporates, promoter-led groups and global businesses on compliance, regulatory risk and board governance. In GIFT IFSC, the IFSCA regime is his day job rather than a research topic.