Mandatory Late Fee Interest: What You Need to Know as Business in GIFT IFSC

The International Financial Services Centres Authority (IFSCA) has issued a new circular regarding the interest on late payment of fees, effective from March 1, 2025. This circular provides clarity on the penalty structure and interest calculations applicable to regulated entities operating within International Financial Services Centres (IFSCs). Here's a breakdown of what you need to know.

Key Highlights of the Circular

1. Revised Fee Structure

   • The circular references a previous amendment dated February 6, 2024, which outlined the applicable fee structure for entities undertaking permissible activities in IFSCs.

2. Penalty on Late Fee Payment

   • If an entity fails to pay its outstanding dues/fees within the specified time, a 20% late fee on the outstanding amount will be levied.

   • Additionally, a 15% simple interest per month on the late fee will be charged until the dues are cleared. Even a partial month will be considered a full month for interest calculation.

Example Illustration (Before March 1, 2025)

To better understand the calculation, let's consider an entity that was required to pay a fee of USD 1,000 by March 31, 2024, but makes the payment on June 30, 2024. The charges will be as follows:

• Originally applicable fee (A): USD 1,000

• Late fee (B): USD 200 (20% of A)

• Interest on late fee (C): USD 90 [(15% of B) x 3 months]

• Total payable amount (D): USD 1,290

Changes Effective from March 1, 2025

Starting March 1, 2025, the penalty calculation changes:

• A 0.75% simple interest per month will be charged on the unpaid or short-paid fee.

Example Illustration (After March 1, 2025)

If an entity was required to pay USD 1,000 by March 31, 2025, but only makes the payment on July 15, 2025, the charges will be as follows:

• Originally applicable fee (A): USD 1,000

• Interest for the delay (B): USD 30 [(0.75% of A) x 4 months]

• Total payable amount (C): USD 1,030

Why This Matters?

• Lower Interest on Late Payment: The new structure significantly reduces the financial burden on entities compared to the earlier 15% per month on the late fee.

• Encourages Timely Compliance: Entities are incentivized to pay their fees on time to avoid accumulating penalties.

• Transparency in Fee Structure: The clear guidelines help businesses operating in IFSCs plan their payments better and avoid unexpected financial penalties.

Final Thoughts

This circular is an important update for all IFSC entities. Ensuring timely payments will help avoid additional financial strain. The revised penalty structure, effective from March 1, 2025, offers a more predictable and structured approach, benefiting businesses operating within the IFSC framework.