TONNAGE TAX SCHEME (Sec 115-V to Sec 115-VZC)
1. Bareboat charter cum demise (BBCD) – Ownership is to be transferred after a specified period of time.
2. Bareboat charter (BCC) – Hiring of ships for a stipulated period on terms which gives charterer possession and control of ship.
3. Exclusions from operation of ships –
(i) Chartered Out on bareboat charter cum demise basis
(ii) Chartered Out on bareboat charter for more than 3 Years
4. Qualifying Ships –
(i) Sea going ship/vessel of Net tonnage >= 15
(ii) Ship registered under Merchant Shipping Act or registered outside India for license obtained from DGS
(iii) Valid Certificate of ship indicating Net Tonnage
Does not includes –
(i) Sea going ship/vessel, main purpose is provision of goods & services of kind normally provided on land
(ii) Fishing Vessels, Factory ships, pleasure crafts, harbor & river ferries, offshore installations
(iii) Qualifying Ships used for fishing vessel for more than 30 days in previous year.
5. Tonnage Income (On basis of each Qualifying Ship taken as individually) –
Tonnage Income = Daily Tonnage Income * No. of Days ship operated as qualifying ship
Daily Tonnage Income
Rs 46 per 100 tons
1000 – 10000
Rs 460 + Rs 35 per 100 tons exceeding 1000 tons
10000 – 25000
Rs 3610 + Rs 28 per 100 tons exceeding 10000 tons
Rs 7810 + Rs 19 per 100 tons exceeding 25000 tons
(i) In case of Tonnage indicated in Certificate – Consider the tonnage as specified in certificate
(ii) Purchase of Slot or Space Charter (On Size of Container)
2.5 Twenty Foot Equivalent Unit (TEU) = 1 Net Tonnage (Deemed)
(iii) In case where Cargo is restricted by Volume
19 Cubic Meter (cbm) = 1 Net Tonnage (Deemed)
(iv) In case where Cargo is restricted by Weight
14 Metric Tons = 1 Net Tonnage (Deemed)
6. Rules for calculating tonnage income –
(i) Firstly ignore any “Kilograms” from tonnage
(ii) Now tonnage shall be rounded off to nearest multiple of 100 tons.
(iii) No Deduction / Set off shall be allowed from tonnage income
7. Jointly operated Qualifying Ships –
(i) Joint Interest / Agreement for Use / Respective Shares are definite & ascertainable –
Proportionate Income = Share of income proportionate to share of interest in the ship
(ii) In other cases –
Calculate Tonnage Income of each company separately as if each had been the only operator.
8. Shipping Income –
(i) Income from Core Activities –
(a) Operating Qualifying Ships
(b) Other Ship relating income viz. earning from pooling arrangements or contracts of affreightment.
(c) Specific shipping trades (On-board or on-shore activities of passenger ships comprising of fares and food and beverages consumed on board and slot charters, space charters, joint charters, feeder services, container box leasing of container shipping).
(ii) Income from Incidental Activities –
(a) Maritime Consultancy Charges
(b) Income from loading / unloading of cargo
(c) Ship Management Fees or remuneration received for managed vessels
(d) Maritime Education & recruitment fees
NOTE – IF INCOME UNDER (ii) ABOVE EXCEEDS 25% OF TURNOVER FROM CORE ACTIVITIES UNDER (i) ABOVE, SUCH EXCESS SHALL NOT BE PART OF TAXABLE INCOME UNDER THIS CHAPTER & SHALL BE TAXABLE UNDER OTHER PRVISIONS OF INCOME TAX ACT
(iii) Income of Non Qualifying Ships –
….shall be calculated as per normal provisions of this act.
9. General Exclusions of certain provisions from the Income under this Chapter
- Section 30 to 43B
- No carry forward of loss related to business of operating qualifying ships
- Chapter VI-A in relation to income of business of operating qualifying ships
- Depreciation u/s 32 in relation to business of operating qualifying ships
- MAT Provisions u/s 115 JB in relation to book profits of business of operating qualifying ships.
10. Sale / Transfer of Qualifying Ships –
Capital Gains shall be calculated as per normal provisions u/s 45 to 51.
11. Transfer of profits to Tonnage Tax Reserve Account –
Transfer Amount = 20 % of Book profits (as calculated for the purposes of Sec 115-JB) from Core & Incidental Activities.
Utilization of such reserve within 8 years of credit –
Only for the purposes of acquiring new ships or for the operation of qualifying ships (Not be used for distribution of dividends, remittances outside India or for creation of asset outside India)
12. Limit for charter in of tonnage –
Ratio = Total Net Tonnage for “Charter In” of Qualifying Ships * 100
Total Net Tonnage for “Charter In & Out” of Qualifying Ships
This ratio shall not exceed 49 %, otherwise entire shipping income shall be calculated in accordance with normal provisions of Income Tax Act, for such previous year.
(Here “Charter In” shall exclude ship chartered in on BBCD terms)