CBDT Notifies TDS Relief for IFSC Ship Lease Rent Payments

The Central Board of Direct Taxes (CBDT), Ministry of Finance, has issued Notification No. 75/2026 dated 3rd July 2026 regarding tax deduction relief on ship lease payments. As per the notification, no tax deduction shall be made under section 393(1) [Table S.No. 2] of the Income-tax Act, 2025 on lease rent or supplemental lease rent paid by a lessee to a lessor, where the lessor is a Unit of an International Financial Services Centre (IFSC) engaged in the business of leasing ships.

The exemption is subject to compliance with prescribed conditions. The IFSC ship leasing unit must furnish a statement-cum-declaration in Form No. 1(N) to the lessee, specifying the twenty consecutive tax years for which it opts to claim deduction under section 147 of the Income-tax Act, 2025. After receiving this form, the lessee is not required to deduct tax on eligible payments made or credited to the lessor.

The lessee must also report details of all such payments on which tax has not been deducted in the statement of tax deduction under section 397(3)(b) read with rule 219 of the Income-tax Rules, 2026. The relief will be available only for the twenty consecutive tax years declared by the lessor. For any other year, the lessee will be liable to deduct tax on lease rent payments.

The notification also provides Form No. 1(N), which requires details such as the name, PAN, IFSC unit details, registration/permission details, tax year, and deduction period. The notification is deemed to have come into force from 1st April 2026. CA Sansaar

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