Extension of benefits of tonnage tax scheme to inland vessels

The Finance Bill, 2025, proposes several key changes in the Income Tax Act, 1961, to continue reforms in the direct tax system through tax reliefs, removing difficulties faced by taxpayers, and rationalizing¹ various provisions. Here are some of the key changes:

Extension of benefits of tonnage tax scheme to inland vessels
Tonnage tax scheme in Chapter XII-G of the Act was brought vide Finance Act, 2004 in order
to promote Indian shipping industry wherein the qualifying shipping companies were given the choice
to opt for the tonnage tax regime or continue to remain within the normal corporate tax regime.Representations were received to extend tonnage tax scheme to inland vessels to promote inland water
transportation industry. It is stated that at present, India is short of inland water transport vessels fleet and require
higher investments in the sector which is capital intensive. Therefore, to provide a boost to inland water
transportation, it was represented to include inland vessels under the ambit of tonnage tax scheme.
3. Therefore, to promote inland water transportation in the country and to attract investments in the
sector, it is proposed to extend the benefits of tonnage tax scheme to Inland Vessels registered under
Inland Vessels Act, 2021. Accordingly inland vessels have been included in the section 115VD for
being eligible to be a qualified ship. Further, inland vessels have been defined in section 115V of the
Act in the same manner as provided in the Inland Vessels Act, 2021. Other corresponding amendments
have been made to extend the tonnage tax scheme to inland vessels.
4. These amendment will take effect from the 1st day of April, 2026 and shall, accordingly, apply
in relation to the assessment year 2026-27 and subsequent assessment years.

[Clauses 26, 27, 28, 29, 30, 31, 33, 34, 35 & 36]