CBDT Grants TDS Exemption for Ship Leasing Income in IFSC Unit
CBDT Grants TDS Exemption for Ship Leasing Income in IFSC Unit
The Central Board of Direct Taxes (CBDT) has granted an exemption from Tax Deducted at Source (TDS) on income from ship leasing to units operating within the International Financial Services Centre (IFSC).
"Central Government hereby specifies that no deduction of tax shall be made under Section 194-I of the Income Tax Act on payment in the nature of lease rent or supplemental lease rent, as the case may be, made by a person (lessee) to a person being a Unit of an International Financial Services Centre (lessor) for the lease of a ship," the CBDT notification stated.
The exemption will be applicable provided that a set of specific conditions are met.
CBTD has clarified that in order to avail of the exemption, the lessor must provide a statement-cum-declaration to the lessee. This statement should include details from the previous years within the span of 10 consecutive assessment years for which the lessor chooses to seek deductions under sub-sections (1A) and (2) of Section 80LA of the Income Tax Act. This statement-cum-declaration needs to be submitted and duly verified for each relevant previous year within the specified 10 consecutive assessment years.
To qualify for the exemption, the lessee is required to refrain from deducting tax on payments disbursed or credited to the lessor subsequent to the receipt of a copy of the statement-cum-declaration in Form No. 1, provided by the lessor. Additionally, the lessee is obligated to include details of all payments made to the lessor, where the tax deduction has been omitted due to this notification, in the tax deduction statement.
The relaxation will apply to the lessor exclusively within the relevant previous years spanning the 10 consecutive assessment years, as specified by the lessor in Form No. 1, for which the deduction under Section 80LA is chosen. However, the lessee remains responsible for deducting tax on lease rent payments for any other years outside this specified period.
