Govt scraps TDS on GIFT City aircraft lease rentals
Airlines are now exempt from deducting tax at source on lease rentals paid to eligible aircraft leasing companies in GIFT City. This move aims to boost airline cash flow and position India as a global aircraft leasing hub. The exemption, effective...
By ET Bureau |
New Delhi: The government has exempted airlines from deducting tax at source (TDS) on lease rentals paid to eligible aircraft leasing companies operating from GIFT City, easing cash flow for carriers and boosting India's ambition to become a global aircraft leasing hub.
In a notification issued late on Friday, the Central Board of Direct Taxes (CBDT) said airlines will no longer have to deduct TDS on lease rent or supplemental lease rent paid to aircraft leasing units set up in an International Financial Services Centre (IFSC), provided the lessor has opted for the concessional tax regime under the Income Tax Act, 2025.
The exemption eliminates the need for airlines to withhold tax on lease payments and deposit it with the government before the lessor claims credit or a refund, improving liquidity for carriers that rely heavily on leased aircraft to expand their fleet.
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The move is also expected to simplify tax compliance and make aircraft leasing structures based in GIFT IFSC more competitive with established offshore leasing centres such as Ireland and Singapore, supporting the development of GIFT City as a global aircraft leasing and financing hub.
India has introduced a series of tax and regulatory incentives for aircraft leasing units in the IFSC over the past few years to attract leasing activity to GIFT City.
CBDT said the exemption will apply only if the IFSC leasing entity has opted for the special tax regime under the Act, which offers tax incentives to eligible units for a specified period.
Leasing remains the dominant mode of aircraft financing in India, accounting for most commercial aircraft operated by domestic airlines. The removal of TDS is expected to improve airlines' cash management while enhancing the competitiveness of GIFT City-based lessors.
Many Indian airlines currently route aircraft leasing transactions through overseas financial centres such as Ireland and Singapore.
In a notification issued late on Friday, the Central Board of Direct Taxes (CBDT) said airlines will no longer have to deduct TDS on lease rent or supplemental lease rent paid to aircraft leasing units set up in an International Financial Services Centre (IFSC), provided the lessor has opted for the concessional tax regime under the Income Tax Act, 2025.
The exemption eliminates the need for airlines to withhold tax on lease payments and deposit it with the government before the lessor claims credit or a refund, improving liquidity for carriers that rely heavily on leased aircraft to expand their fleet.
Also Read: Akasa Air receives 40th aircraft, expands fleet with Boeing 737 MAX 8-200
The move is also expected to simplify tax compliance and make aircraft leasing structures based in GIFT IFSC more competitive with established offshore leasing centres such as Ireland and Singapore, supporting the development of GIFT City as a global aircraft leasing and financing hub.
India has introduced a series of tax and regulatory incentives for aircraft leasing units in the IFSC over the past few years to attract leasing activity to GIFT City.
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CBDT said the exemption will apply only if the IFSC leasing entity has opted for the special tax regime under the Act, which offers tax incentives to eligible units for a specified period.
Leasing remains the dominant mode of aircraft financing in India, accounting for most commercial aircraft operated by domestic airlines. The removal of TDS is expected to improve airlines' cash management while enhancing the competitiveness of GIFT City-based lessors.
Many Indian airlines currently route aircraft leasing transactions through overseas financial centres such as Ireland and Singapore.
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