CBDT Notifies TDS Relief for IFSC Ship Lease Payments

The Ministry of Finance, through the Central Board of Direct Taxes, has issued Notification No. 75/2026 dated 3 July 2026 regarding tax deduction relief on lease rent payments related to ship leasing in International Financial Services Centres.

Under this notification, no tax deduction will be required on lease rent or supplemental lease rent paid by a lessee to an IFSC Unit engaged in the business of leasing ships, subject to specified conditions. The relief applies under the Income-tax Act, 2025, where the lessor opts for deduction under Section 147.

The lessor must submit a statement-cum-declaration in Form No. 1(N) to the lessee. This form must include details of the twenty consecutive tax years for which the IFSC Unit chooses to claim the deduction. After receiving this declaration, the lessee is not required to deduct tax on eligible lease payments made to the lessor.

However, the lessee must report details of all such payments where tax has not been deducted in the prescribed statement of deduction of tax. The relaxation will be available only for the twenty consecutive tax years declared by the lessor. For any other year, tax deduction will continue to apply.

The notification also provides the format of Form No. 1(N), which requires details such as name, PAN, IFSC unit details, registration or permission information, period of deduction claimed, declaration, and verification. The notification is deemed to have come into force from 1 April 2026. CA Sansaar

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