The Finance Bill, 2026 proposes a set of consequential amendments to Chapter XIII-G of the Income-tax Act, 2025 to operationalise the extension of the tonnage tax scheme to inland vessels registered under the Inland Vessels Act, 2021. While the scheme was extended by the Finance Act, 2025, several provisions required alignment with the inland waterways regulatory framework. The amendments clarify that tonnage for inland vessels will be determined based on a “valid certificate,” specifically the certificate of registration that records net tonnage. Core shipping activities eligible for tonnage tax are expanded to expressly include inland vessels. Compliance conditions relating to training requirements, certification, and computation of average net tonnage are modified to recognise the role of the Inland Waterways Authority of India and designated state authorities, alongside maritime regulators. Definitions are also updated to formally include the Inland Waterways Authority of India. These amendments take effect from 1 April 2026 and apply from tax year 2026–27 onwards, ensuring seamless application of the tonnage tax regime to inland water transport.
Amendments in Chapter XIII -G for giving effect to extension of Tonnage tax scheme to Inland Vessels
Chapter XIII-G of the Act provides for special provisions relating to income of shipping companies. Vide Finance Act, 2025, benefit of tonnage tax scheme under the said Chapter was extended to Inland vessels registered under Inland Vessels Act, 2021 to promote the inland water transportation.
2. Certain modifications are required in provisions of the said Chapter for aligning them with the Inland Vessels Act, 2021, and rules made thereunder in order to give effect to Tonnage tax scheme extended to inland vessels.
3. In view of the above, it is proposed to make the following amendments: –
I. Section 227 of the Act relates to computation of tonnage income. Sub-section 4 of the said section provides that the tonnage shall mean the tonnage of a ship or inland vessel, as the case may be, indicated in the certificate referred to in sub-section (9) of the said section. It is proposed to replace the term “certificate” with “valid certificate” in sub-section (4)(a) of the said section for providing clarity.
II. Section 227(9)(b)(iii) of the Act provides that in the case of inland vessel registered in India, valid certificate is defined as a certificate issued under the Inland Vessels Act, 2021. However, representation was received that no separate Tonnage Certificate is issued under the Inland Vessels Act, 2021 and “Certificate of registration” issued under the Inland Vessels Act, 2021 states the Net Tonnage of the vessel. Accordingly, the word “certificate” is proposed to be replaced with “certificate of registration” issued under the Inland Vessels Act, 2021 in the aforesaid provision.
III. Section 228 of the Act relates to relevant shipping income and exclusion from book profit. Sub-section (3)(b)(ii)(A) of the said section provides that on-board or on-shore activities of passenger ships would be included in the core activities of a tonnage company. It is proposed to amend the said provision to bring inland vessels under its purview.
IV. Section 232 of the Act relates to certain conditions for applicability of tonnage tax scheme. Sub-section (12) of the said section provides that a tonnage tax company shall comply with the minimum training requirement in respect of trainee officers as per the guidelines issued by the Director-General of Shipping and notified by the Central Government. It is proposed to amend sub-section (12) to insert reference to guidelines related to minimum training requirements in case of inland vessels issued by Inland Waterways Authority of India and notified by the Central Government.
V. Sub-section (13) of the section 232 of the Act states that a tonnage tax company is required to furnish a copy of the certificate issued by the Director-General of Shipping to the effect that such company has complied with the minimum training requirement as per the relevant guidelines along with the return of income under section 263. Since the designated authority for vessels under Merchant Shipping Act, 1958 and the Inland Vessels Act, 2021 differ, it is proposed to amend the said sub-section to refer to the designated authority in respect of inland vessels.
VI. Sub-section (17) of the section 232 of the Act provides that the average of net tonnage shall be computed in the manner prescribed, in consultation with the Director-General of Shipping. It is proposed to amend sub-section (17) to add reference to Inland Waterways Authority of India, in case of inland vessels.
VII. Section 235 relating to definitions pertaining to Chapter XIII-G is also proposed to be amended to provide for definition of “Inland Waterways Authority of India”.
4. The amendment will take effect from the 1st day of April, 2026 and will, accordingly, apply to tax year 2026-27 and subsequent tax years.
[Clause Clauses 52,53,54,55]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 52 seeks to amend section 227 of the Income-tax Act, 2025 relating to computation of tonnage income.
Sub-section (4) of the said section provides that the tonnage shall mean the tonnage of a ship or inland vessel, as the case may be, indicated in the certificate referred to in subsection (9) of the said section.
It is proposed to amend clause (a) of sub-section (4) of the said section so as to substitute the word “certificate” with the words “valid certificate”.
Sub-clause (iii) of clause (b) of sub-section (9) of the said section provides that in case of inland vessel registered in India, a valid certificate shall mean a certificate issued under the Inland Vessels Act, 2021.
It is proposed to amend the said sub- clause so as to substitute the word “certificate” with the words “certificate of registration”.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation the tax year 2026-2027 and subsequent years.
Clause 53 seeks to amend section 228 of the Income-tax Act, 2025 relating to relevant shipping income and exclusion from book profit.
Item (A) of sub-clause (ii) of clause (b) of sub-section (3) of the said section provides that on-board or on-shore activities of passenger ships would be included in the core activities of a tonnage company.
It is proposed to amend the said item so as to bring inland vessels also under its ambit.
This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Clause 54 seeks to amend section 232 of the Income-tax Act, 2025 relating to certain conditions for applicability of tonnage tax scheme.
Sub-section (12) of the said section provides that a tonnage tax company shall comply with the minimum training requirement in respect of trainee officers as per the guidelines issued by the Director-General of Shipping and notified by the Central Government.
It is proposed to amend the said sub-section so as to insert reference to Inland Waterways Authority of India, in case of inland vessels.
Sub-section (13) of the said section provides that a tonnage tax company is required to furnish a copy of the certificate issued by the Director-General of Shipping to the effect that such company has complied with the minimum training requirement a per the relevant guidelines along with the return of income under section 263.
It is further proposed to amend the said sub-section so as to insert reference to designated authority as appointed by the respective State Governments under the Inland Vessels Act, 2021.
Sub-section (17) of the said section provides that the average of net tonnage shall be computed in the manner prescribed, in consultation with the Director-General of Shipping.
It is also proposed to amend the said sub-section so as to insert reference to the Inland Waterways Authority of India.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Clause 55 seeks to amend section 235 of the Income-tax Act, 2025 relating to interpretation for certain expressions in Part G of Chapter XIII.
It is proposed to amend the said section to insert new sub-clause (fa) so as to provide that “Inland Waterways Authority of India” shall have the same meaning as assigned to it in section 3 of the Inland Waterways Authority of India Act, 1985.
This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
52. Amendment of section 227.
In section 227 of the Income-tax Act, —
(a) in sub-section (4), in clause (a), for the word “certificate”, the words “valid certificate” shall be substituted;
(b) in sub-section (9), in clause (b), in sub-clause (iii), for the word “certificate”, the words “certificate of registration” shall be substituted.
53. Amendment of section 228.
In section 228 of the Income-tax Act, in sub-section (3), in clause (b), in sub-clause (ii), in item (A), after the words “passenger ships”, the words “or inland vessels” shall be inserted.
54. Amendment of section 232.
In section 232 of the Income-tax Act,––
(a) for sub-sections (12) and (13), the following sub-sections shall be substituted, namely:––
“(12) A tonnage tax company, after its option has been approved under section 231(4), shall comply with the minimum training requirement as per the guidelines issued by the Director-General of Shipping or the Inland Waterways Authority of India, as the case may be, and notified by the Central Government.
(13) The tonnage tax company shall be required to furnish a copy of the certificate issued by the Director-General of Shipping, or the designated authority, as appointed by the respective State Governments under the Inland Vessels Act, 2021, as the case may be, along with the return of income under section 263 to the effect that such company has complied with the minimum training requirement as per the guidelines referred to in sub-section (12) for the tax year.”;
(b) in sub-section (17), after the words “Director-General of Shipping”, the words “or Inland Waterways Authority of India, as the case may be” shall be inserted.
55. Amendment of section 235.
In section 235 of the Income-tax Act, after clause (f), the following clause shall be inserted, namely:—
‘(fa) “Inland Waterways Authority of India” shall have the same meaning as assigned to it in section 3 of the Inland Waterways Authority of India Act, 1985;’.
