The tonnage tax scheme, under Chapter XII-G of the Income Tax Act, 1961, is a presumptive tax regime for shipping companies, allowing them to compute income based on the net tonnage of ships and operational days. Currently, only companies operating sea-going ships under the Merchant Shipping Act, 1958, qualify for this scheme. The Finance Bill 2025 proposes extending its benefits to inland vessels registered under the Inland Vessels Act, 2021. This amendment will enable companies involved in inland water transportation to opt for presumptive taxation, providing tax certainty and reducing compliance burdens.
Page Contents
- FAQs – Budget 2025: Extension of Tonnage Tax Scheme to Inland vessels
- Q.1 What is tonnage tax scheme?
- Q.2 What are the salient features of the tonnage tax scheme?
- Q.3 Who is eligible to avail tonnage tax scheme as per existing provisions of the Act?
- Q.4 What changes are proposed in the Finance Bill, 2025 in the tonnage tax scheme?
- Q.5 What will be the benefits of extending the scheme to inland vessels?
FAQs – Budget 2025: Extension of Tonnage Tax Scheme to Inland vessels
Q.1 What is tonnage tax scheme?
Ans. Chapter XII-G of the Income tax Act 1961 provides special provisions relating to income of the shipping companies. Tonnage tax scheme, as provided in the Chapter XII-G, is a presumptive tax scheme for shipping companies which allows them to compute their profits on presumptive basis.
Q.2 What are the salient features of the tonnage tax scheme?
Ans. (i) The scheme allows shipping companies to opt for presumptive taxation.
(ii) Under the scheme, computation of income will be made on presumptive basis based on the net tonnage of the ship and the days involved.
(iii) If scheme is not opted, the income will be computed as per the regular provisions of the Act.
(iv) The scheme provides tax certainty to the shipping companies.
Q.3 Who is eligible to avail tonnage tax scheme as per existing provisions of the Act?
Ans. At present, shipping companies which operate ‘qualifying sea going ships’ registered under the Merchant Shipping Act, 1958, are eligible to avail tonnage tax scheme.
Q.4 What changes are proposed in the Finance Bill, 2025 in the tonnage tax scheme?
Ans. The Finance Bill 2025 proposes to extend the benefit of taxation under the Tonnage tax scheme to the inland vessels registered under the Inland Vessels Act, 2021. Therefore, henceforth companies engaged in the business of inland water transportation can also avail benefits of tonnage tax scheme.
Q.5 What will be the benefits of extending the scheme to inland vessels?
Ans. Tonnage tax scheme has provided certainty to the industry about their tax liability. Companies involved in inland water transportation can avail benefit from such scheme. The amendment shall encourage the inland water transportation in the country.
