To bolster India’s cruise-shipping sector, the Finance Bill 2024 introduces significant tax reforms aimed at attracting global cruise operators and enhancing domestic tourism. A new section, 44BBC, establishes a presumptive taxation regime for non-resident cruise ship operators, deeming 20% of their passenger carriage receipts as taxable profits. This new regime excludes cruise ships from the existing section 44B provisions applicable to other shipping businesses. Additionally, lease rentals paid by a company under the 44BBC regime to a foreign company, if both are subsidiaries of the same holding company, will be exempt from tax under the newly proposed clause 15B of section 10. These changes, effective from April 1, 2025, and applicable for the assessment year 2025-26 and beyond, aim to simplify tax structures and attract international best practices to India’s cruise industry.
Promotion of domestic cruise ship operations by non-residents
Certain amendments have been proposed to promote the cruise-shipping industry in India. The aim is to make India an attractive cruise tourism destination, to attract global tourists to cruise shipping in India and to popularise cruise shipping with Indian tourists. Participation of international cruise-ship operators in this sector will encourage development of this sector and enable access to international best practices.
2. In order to provide clarity, certainty and simple structure for the business of cruise-shipping, which may be operating as multi-layer entities, the following is proposed. A presumptive taxation regime is being put in place for a non-resident, engaged in the business of operation of cruise ships, alongwith exemption to income of a foreign company from lease rentals, if such foreign company and the non-resident cruise ship operator have the same holding company.
3. It is, therefore, proposed to insert a new section 44BBC, which deems twenty per cent of the aggregate amount received/ receivable by, or paid/ payable to, the non-resident cruise-ship operator, on account of the carriage of passengers, as profits and gains of such cruise-ship operator from this business. Applicability of this section, will be subject to prescribed conditions.
4. Provisions of section 44B relating to presumptive taxation for shipping business of non-residents, shall therefore, no longer apply to cruise-ship business.
5. Further, the lease rentals paid by a company which opts for presumptive regime under section 44BBC (‘the first company’), shall be exempt in the hands of the recipient company, if such company is a foreign company and such recipient company and the first company are subsidiaries of the same holding company. This is proposed to be done by insertion of a new clause (15B) in section 10. Subsidiary company and holding company have been defined in the Explanation to this new clause. This exemption shall be available upto assessment year 2030-31.
6. These amendments will take effect from the 1st day of April, 2025 and will, accordingly, apply in relation to the assessment year 2025-26 and subsequent assessment years.
[Clauses 4, 16 & 17]
Extract of New section 44BBC.
After section 44BBB of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2025, namely:––
Special provision for computing profits and gains of business of operation of cruise ships in case of non- residents.
‘44BBC. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of cruise ships subject to such conditions as may be prescribed, a sum equal to twenty per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
(2) The amounts referred to in sub-section (1) shall be the following, namely:—
(a) the amount paid or payable to the assessee or to any person on his behalf on account of the carriage of passengers; and
(b) the amount received or deemed to be received by or on behalf of the assessee on account of the carriage of passengers.’.
Extract of Clause 4 of Finance Bill 2024
Clause 4 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.
It is further proposed to insert a new clause (15B) in the said section to provide that any income of a foreign company from lease rentals by whatever name called, of cruise ships, received from a specified company which operates such ship or ships in India, where such foreign company and the specified company are the subsidiaries of the same holding company, and such income is received or accrues or arises in India for any assessment year beginning on the 1st day of April, 2030.
The Explanation proposed to the said clause provides the meaning of the expressions “specified company”, “holding company” and “subsidiary company”.
These amendments will take effect from 1st April, 2025 and will, accordingly, apply in relation to the assessment year 2025-2026 and subsequent years.
Extract of Clause 16 of Finance Bill 2024
Clause 16 of the Bill seeks to amend section 44B of the Income-tax Act relating to special provision for computing profits and gains of shipping business in the case of non-residents.
It is proposed to amend the marginal heading and sub-section (1) of the said section so as to provide that the same shall be applicable in the case of non-resident assessee engaged in the business of operation of ships other than cruise ships referred to in section 44BBC.
Sub-section (1) of the said section provides that notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to seven and a half per cent. of the aggregate of the amounts specified in sub-section (2) of the said section shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
It is further proposed to amend the said sub-section to exclude the application of cruise ships referred to in section 44BBC from the said section.
These amendments will take effect from 1st April, 2025 and will, accordingly, apply in relation to the assessment year 2025-2026 and subsequent years.
Extract of Clause 17 of Finance Bill 2024
Clause 17 of the Bill seeks to insert new section 44BBC in the Income-tax Act relating to special provision for computing profits and gains of the business of operation of cruise ships in the case of non-residents.
Sub-section (1) of the said section seeks to provide that notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of cruise ships subject to the conditions, a sum equal to twenty per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
Sub-section (2) of the said section further proposes to provide that the amounts referred to in sub-section (1) shall be the following, namely:-
(i) the amount paid or payable to the assessee or to any person on his behalf on account of the carriage of passengers; and
(ii) the amount received or deemed to be received by or on behalf of the assessee on account of the carriage of passengers.
These amendments will take effect from 1st April, 2025 and will, accordingly, apply in relation to the assessment year 2025-2026 and subsequent years.
