JSA Newsletter | IFSCA | July and August 2026 Edition

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The International Financial Services Centres Authority (“IFSCA/Authority”), India’s unified regulator for International Financial Services Centres (“IFSCs”), is focused on developing a world-class financial hub at the country’s first IFSC, Gujarat International Finance Tec-City (“GIFT City”). The Reserve Bank of India (“RBI”), in consultation with IFSCA[1], revised certain answers in the Frequently Asked Questions (“FAQs”) on the annual return on Foreign Liabilities and Assets (“FLA”) and added a new question thereto[2] under the Foreign Exchange Management Act, 1999 (“FEMA”). The revised FAQs clarified that while Foreign Direct Investment (“FDI”) norms do not apply to investments made in Regulated Entities (“REs”) in IFSCs, data relating to such investments is still required for the compilation of India’s balance of payments data. Accordingly, while REs are not required to file the FLA return with RBI, IFSCA will issue separate instructions for the submission of the necessary data.

IFSCA, vide press release dated July 2, 2026, communicated that an Exchange of Letters (“EoL”) was signed on June 26, 2026, with the Financial Services Agency of Japan and exchanged on the occasion of the 16^th India-Japan Annual Summit held in New Delhi, to formalise regulatory cooperation in identified areas of mutual interest. The objective of the EoL is to facilitate the sharing of information on developments in the regulation of financial products, financial services and financial institutions in both jurisdictions, as well as developments in regulatory and supervisory frameworks and initiatives, including the sharing of best practices. Further, IFSCA and the Financial Supervisory Commission, Taiwan executed a ‘co-operation agreement on fintech’, virtually exchanged and operationalised on August 28, 2026, at the 19^th India-Taiwan Economic Consultations held in Bengaluru, to formalise regulatory cooperation in the fintech space[3]. The agreement establishes a referral mechanism for innovator businesses seeking to operate in each other’s markets and facilitates the sharing of information on innovation in financial services, including emerging market trends, new technologies and regulatory developments.

IFSCA, vide press release dated July 15, 2026, has issued an expert committee report on development of Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”) in GIFT City. The report recommends measures to position GIFT City IFSC as a preferred gateway for global capital flows into Indian real estate and infrastructure assets. Key recommendations include the introduction of mortgage REITs, extension of anti-greenwashing principles to Environmental, Social, and Governance-labelled REITs and InvITs, a calibrated approach towards Small and Medium REITs, amendments to the IFSCA (Fund Management) Regulations, 2025, establishment of an Investor Protection Fund, and tax parity between IFSCA-registered and Securities and Exchange Board of India (“SEBI”) registered investment trusts.

With the aim of strengthening the regulatory framework and promoting ease of doing business in IFSCs, IFSCA has approved a series of regulatory measures in the 29^th meeting of the Authority held on July 24, 2026[4]. Some of the key decisions include the following:

• approval of the IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026 and the IFSCA (Electronic Trading Platform) Regulations, 2026;
• amendments to the IFSCA (Capital Market Intermediaries) Regulations, 2025 relating to withdrawal of credit ratings;
• extensive amendments to the IFSCA (Fund Management) Regulations, 2025 to facilitate fund management, enhance investor protection and support blended finance structures; and
• approval of the revamped draft IFSCA (Setting up and Operation of International Branch Campuses) Regulations, 2026, introducing measures to strengthen the regulatory framework for international branch campuses, safeguarding student interests and enhancing the attractiveness of GIFT City IFSC as a destination for foreign higher educational institutions.

Following are a few important publications made by the Authority in the months of July and August 2026:

• Survey 2026 report on Artificial Intelligence (“AI”), assessing AI adoption, maturity and governance across the GIFT City IFSC ecosystem[5];
• FAQs on IFSCA (Fund Management) Regulations, 2025, providing detailed guidance on the regulatory framework for fund management activities in IFSCs[6]; and
• Special Economic Zones Compliance FAQs Booklet (Version 2.0) providing guidance to units operating in GIFT City IFSC on their compliance obligations under the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006[7].

This edition of the July-August 2026 newsletter captures the key regulatory developments that aim to reinforce GIFT City IFSC’s role as a dynamic and competitive international financial centre. Notably, these developments underscore IFSCA’s commitment to enhancing GIFT City IFSC’s position as a global financial hub through regulatory reforms, sector-specific initiatives, and strategic engagements.

Exemption from tax deduction at source in respect of payments made to units of IFSC

The Ministry of Finance, vide notification dated July 10, 2026, has provided exemption from tax deduction at source, on specified payments made by any payer to specified categories of units operating within an IFSC under the provisions of the Income-tax Act, 2025 (“Act”). Regarding this, a total of 14 (fourteen) categories of IFSC units are identified that are eligible as payees, namely – banking unit, IFSC insurance intermediary office, finance company, finance unit, Fund Management Entity (“FME”), broker dealer, investment adviser, registered distributor, custodian, Credit Rating Agency (“CRA”), investment banker, debenture trustee, international trade finance service, and fintech entity. The above provisions are subject to the certain conditions, such as:

• the payee must furnish a statement-cum-declaration in Form No.1(N) (“Form”) to the payer giving details of the 20 (twenty) consecutive tax years for which the payee opts for claiming deduction and such statement-cum-declaration must be furnished and verified in the prescribed manner;
• the payer must not deduct tax on payment made or credited to payee after the date of receipt of copy of statement- cum-declaration in the Form from the payee and furnish the particulars of all the payments made to payee on which tax has not been deducted;
• the relaxation is available to the payee only during the declared 20 (twenty) consecutive tax years, and the payer is liable to deduct tax for any year falling outside that period; and
• the Principal Director General of Income-tax (systems) or the Director General of Income-tax (systems), will lay down procedures, formats and standards for ensuring secure capture and transmission of data and uploading of documents and they will also be responsible for evolving and implementing appropriate security, archival and retrieval policies.

Amendments to the Master Circular for CRAs in the IFSC

IFSCA, vide circular dated July 16, 2026, has amended the Master Circular for CRAs in the IFSC dated August 5, 2025, which specifies the operational framework for regulating CRAs registered with IFSCA. Some of the key amendments are as follows:

• new explanation 3 is added to sub-paragraph 5.1.1 (pertaining to credit ratings under permissible activities), accordingly, credit ratings will include credit quality ratings and other similar services relating to credit rating by, whatever name called;
• CRAs are permitted to carry out financial strength rating activity;
• sub paragraph 13.1.10 (pertaining to rating process for solicited ratings) is replaced and now states that the CRA must maintain information and records that are accurate and sufficiently detailed to reconstruct the credit rating process for a given credit rating action including the important factors underlying the credit rating;
• 2 (two) new sub-paragraphs 13.1.11 and 13.1.12 are added to paragraph 13 (pertaining to rating process), stating that the records maintained by CRA must include a summary of material considerations and analytical reasoning, including key arguments for and against the rating decision, without attribution of comments to specific individuals. Further, the CRA will maintain records in the manner and for such period, from the date any rating is withdrawn or discontinued, in the manner as provided under the IFSCA (Capital Market Intermediaries) Regulations, 2025;
• sub-paragraph 17.1 (pertaining to dissemination of ratings) is substituted to state that all the rating actions on initial rating assignments and subsequent rating actions will be disseminated by the CRA on its website along with the rating rationale; and
• Paragraph 25.1 (pertaining to disclosure on the website) is amended to provide that the requirement relating to disclosure on the website will not be mandatory in respect of information relating to private credit rating assignments.

Framework on capital relief and prudential requirements for factoring transactions

IFSCA, vide circular dated July 21, 2026, has issued a framework prescribing capital relief and prudential requirements for finance companies and finance units registered under the IFSCA (Finance Company) Regulations, 2021 undertaking factoring business in IFSCs.

Finance companies obtaining credit protection in the form of credit insurance or guarantee for factoring transactions from eligible institutions are entitled to capital relief. The covered portion of a factoring transaction is to be assigned the risk weight of the protection provider, while the uncovered portion is to be assigned the risk weight of the importer. Eligible protection providers include sovereign entities, export credit agencies, public sector enterprises, multilateral development banks, banks, securities firms, and other prudentially regulated financial institutions. The benefit of capital relief is available to all factors registered with the IFSCA.

The circular specifies, inter alia, the following prudential requirements:

• Exposure ceilings and attribution: All factoring transactions are required to be covered within the overall exposure ceiling as per the IFSCA’s circular dated May 25, 2021, on the ‘Framework on Computation of Exposure Ceiling for Finance Companies/Finance Units’. Except in those cases where the entire credit risk is assumed by the import factor, exposures will be reckoned on the assignor for with-recourse factoring, and on the debtor for without-recourse factoring, irrespective of credit protection. It is separately provided that, under the two-factor model, exposure will be reckoned on the import factor to the extent of available coverage. Where exposure is protected by trade credit insurance, the covered portion will be reckoned on the eligible protection provider and the uncovered portion on the underlying debtor.
• Non-Performing Asset (“NPA“) recognition and provisioning: A receivable acquired under factoring that remains unpaid for more than 90 (ninety) days past its due date is to be treated as a NPA, irrespective of when it was acquired or whether the factoring was on a recourse or non-recourse basis. However, for finance companies with an asset size of less than USD 150,000,000 (US Dollars one hundred and fifty million) at the end of the previous financial year, the NPA recognition threshold is 180 (one hundred and eighty) days past the due date. For finance units with an asset size below that threshold, the applicable NPA recognition norm is the lower of the NPA classification period prescribed by the home country regulator, or 180 (one hundred and eighty) days past the due date. NPA classification is required to be reflected against the entity on which the exposure was booked, with corresponding provisioning. Asset classification and provisioning are also required to be done in compliance with IFSCA’s circular dated May 3, 2021, on ‘Prudential Regulations and activity specific Guidelines’.
• Board-approved underwriting limits: Finance companies and finance units underwriting a debtor’s credit risk in without-recourse factoring are required to have a clearly laid-down board-approved limit for all such underwriting commitments.

The circular is expected to improve capital efficiency for IFSC-based factors using eligible credit insurance or guarantees, including under two-factor arrangements. However, factors should review protection-provider eligibility and contractual terms before claiming the benefit, while aligning exposure monitoring, NPA recognition and underwriting limits with the prescribed requirements. Finance units should additionally confirm home-regulator recognition.

Modifications under IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022

IFSCA, vide circular dated August 3, 2026, has amended the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022, to strengthen the reporting and customer due diligence framework for REs in IFSCs. The amendments, inter alia, require compliance with Rules 7 and 8 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, and mandate the online submission of reports through the FINgate 2.0 portal. The circular also expands the list of jurisdictions from which non-resident Indians may be onboarded through the video-based customer identification process, subject to such jurisdictions not being designated as high-risk by the FATF or the Central Government. Further, Cross Border Wire Transfer Reports (“CBWTRs“) have been inserted into the reporting framework alongside the existing non-profit organisation transaction reports and suspicious transaction reports, ensuring that CBWTRs are now covered within the relevant reporting items.

Subsequent to this circular, IFSCA, vide circular dated August 3, 2026, has also issued FAQs on the IFSCA (Anti Money Laundering, Counter Terrorist Financing and Know Your Customer) Guidelines, 2022.

REs directed to maintain valid letter of approval and regulatory authorisations

IFSCA, vide circular dated August 10, 2026, has directed all REs to ensure continuous compliance with the requirement to hold a valid and subsisting Letter of Approval (“LoA”) under the Special Economic Zones Act, 2005 and applicable regulatory instruments, including registrations, licences, recognitions, authorisations, permissions or approvals issued by IFSCA. The circular reiterates that a valid LoA is a prerequisite for obtaining regulatory instruments from IFSCA and undertaking permissible activities in an IFSC and requires entities to renew their LoAs in accordance with the Special Economic Zones Rules, 2006, including by submitting renewal applications at least 2 (two) months before expiry. REs have also been directed to refrain from carrying out business activities without valid and subsisting LoAs and applicable regulatory instruments, with violations liable to attract appropriate penal or enforcement action under the applicable laws and regulations.

Clarification regarding implementation services by investment advisers in the IFSC

IFSCA, vide circular dated August 10, 2026, has clarified that the circular dated May 12, 2026, titled ‘Implementation Services by Investment Advisers in the IFSC’, does not apply to a FME providing advisory services. The clarification follows Regulation 80 of the IFSCA (Fund Management) Regulations, 2025, which permits an FME, while providing portfolio management services, to also provide advisory services in accordance with the applicable provisions of the IFSCA (Capital Market Intermediaries) Regulations, 2025. Accordingly, FMEs providing such advisory services are not required to comply with the implementation services framework prescribed for investment advisers under the May 12, 2026, circular.

Modification in regulatory framework for Online Bond Platform Providers including measures for promoting ease of doing business

SEBI, vide circular dated August 14, 2026, has modified the regulatory framework for entities operating as Online Bond Platform Providers (“OBPPs”) under Regulation 51A of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. Some of the key features of the circular are as follows:

• OBPPs are now permitted to offer products, securities or services regulated by IFSCA, subject to them being offered in the manner specified for SEBI-registered stock brokers operating within the GIFT-City IFSC. Further, such offers are required to be in compliance with applicable guidelines under FEMA, including overseas investment rules and limits under the Liberalised Remittance Scheme. OBPPs are required to clearly label such products/securities/services as international or overseas instruments to prevent any confusion with domestic debt securities;
• OBPPs are now permitted to offer bonds issued under Section 54EC of the Income-tax Act, 1961 or Section 85 of the Income-tax Act, 2025, either under a different tab on the online bond platform or on any other website/platform. Further, OBPPs are required to provide a disclaimer that these are tax-specific instruments, and the grievance redressal mechanism lies with the issuer, not with SEBI. Furthermore, OBPPs are required to prominently disclose features of 54EC bonds including eligible issuers, lock-in period, investment limit, non-transferable status, tax features, application size, and exemption from listing requirements under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015; and
• the compliance officer requirements have been modified to require OBPPs appointing a compliance officer in accordance with the SEBI (Stock Brokers) Regulations, 2026. Such compliance officer are required to comply with certification requirements (i.e. NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund) Certification Examination) for stock brokers, as prescribed from time to time. This replaced the earlier regime where a company secretary was also permitted to be appointed as a compliance officer.

Enabling sharing of information by Know Your Client Registration Agencies with entities regulated by IFSCA

SEBI, vide circular dated August 20, 2026, has enabled sharing of information between SEBI registered Know Your Client (“KYC”) Registration Agencies (“KRAs”) and entities regulated by IFSCA. In terms of Regulation 16A(1) of the SEBI (KYC Registration Agency) Regulations, 2011 (“SEBI KRA Regulations”), entities regulated by other regulators in the financial sector specified by SEBI may access the system of KRAs for undertaking KYC of their clients who engage them for financial services.

Some of the key features of the circular are as follows:

• IFSCA has been specified for the purpose of Regulation 16A(1) of the SEBI KRA Regulations to enable interoperability and facilitate sharing of information between SEBI registered KRAs and entities regulated by IFSCA;
• all such entities accessing the system of KRAs must follow the guidelines specified in the Master Circular on KYC norms for the securities market dated October 12, 2023; and
• in respect of clients registered as foreign portfolio investors, all entities accessing the system of KRAs must follow the guidelines for ‘Data Security’ specified in SEBI’s Master Circular for Foreign Portfolio Investors, Designated Depository Participants and Eligible Foreign Investors dated May 30, 2024.

Extension of timeline for obtaining International Securities Identification Numbers from recognised depositories in IFSCs

IFSCA, vide circular dated August 25, 2026, has extended the timeline for units in IFSCs that have obtained International Securities Identification Numbers (“ISIN”) from domestic depositories in India to obtain new ISINs from a depository recognised by the IFSCA to December 31, 2026 (previously it was August 31, 2026). Further, the deadline for the recognised depository in the IFSC to submit a compliance report to IFSCA confirming completion of the transition process has been extended to January 31, 2027 (previously it was August 31, 2026).

FMEs to maintain a website or webpage

IFSCA, vide circular dated August 26, 2026, has specified that FMEs registered under the IFSCA (Fund Management) Regulations, 2025 are required to maintain a website or webpage to promote transparency and facilitate access to information for investors and other stakeholders. Some of the key requirements are as follows:

• authorised FMEs and registered FMEs (Non-Retail) must maintain either an independent official website or a dedicated webpage hosted on the website of their parent, holding or group entity, while registered FMEs (Retail) must maintain an independent official website dedicated to their fund management activities in the IFSC;
• the website or webpage must be publicly accessible without registration or login, prominently identify the FME along with its registration number and distinctly display its IFSC activities;
• FMEs must prominently disclose information including their profile and registration details, registered office and contact details, schemes or funds managed, details of service providers, investor grievance redressal mechanism, details of key managerial personnel, regulatory disclosures and material regulatory or enforcement actions during the preceding 3 (three) years;
• registered FMEs (Retail) managing retail schemes must additionally disclose scheme-related documents, periodic portfolio and performance disclosures, valuation policies, details of unclaimed amounts, investor education material and investor charter; and
• every FME must intimate the URL of its website or webpage to IFSCA by December 1, 2026, and notify any subsequent change in the URL through its subsequent quarterly report filings.

These requirements will come into force from December 1, 2026.

This Newsletter has been prepared by:

Nand Gopal Anand Partner	Rajul Bohra Partner	Harshit Dusad Partner
Siddharth Tyagi Senior Legal Consultant	Tanishq Sharma Associate

For more details, please contact km@jsalaw.com.

[1] IFSCA press release dated July 1, 2026

[2] FAQs issued by RBI dated July 1, 2026

[3] IFSCA press release dated August 31, 2026

[4] IFSCA press release dated July 28, 2026

[5] IFSCA report dated July 30, 2026

[6] IFSCA FAQs dated August 3, 2026

[7] IFSCA FAQs dated August 20, 2026