No TDS on dividends between aircraft leasing units in IFSC
Dividends paid between two IFSC aircraft-leasing units no longer have tax deducted at source, once the receiving unit files Form 1(N).
- Document
- Notification Notification No. 141/2026
- Dated
- 06 Nov 2026
- Effective
- Deemed to have come into force on the 1st day of April, 2026.
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Payers need not deduct TDS on qualifying dividends once they receive Form 1(N).
- Both units must be IFSC units primarily engaged in aircraft leasing.
- The receiving unit must file Form 1(N) for the tax year the dividend is payable.
- The payer must still report these untaxed payments in its TDS statement.
- The change is deemed to have taken effect from 1 April 2026.
In short
Notification No. 141/2026 from the Central Board of Direct Taxes (CBDT), part of the Income Tax department, says no TDS (tax deducted at source) is to be taken on certain dividends. It covers dividends paid by one International Financial Services Centre (IFSC, a special zone for financial business) unit primarily in aircraft leasing to another such unit. It is dated 4 November 2026 and is made under the Income-tax Act, 2025.
What has changed
How it worked before
The document does not describe any earlier process for these payments. The notification implies that tax would normally be deducted at source under section 393(1), the Act's TDS rule for dividends, so this notification switches that off for qualifying payments.
What has changed
A payer can now skip TDS on these dividends once it holds a Form 1(N) from the payee. Form 1(N) is a new statement-cum-declaration, meaning a signed statement and declaration. It gives the tax year and confirms that the unit is in IFSC and is engaged in aircraft leasing. The payer must still list the untaxed payments in its TDS statement.
Who this affects
Companies running an IFSC unit primarily in aircraft leasing that receive dividends from another such unit. Also the paying IFSC aircraft-leasing unit that makes those dividend payments.
An example
Skyline Leasing Unit A, an IFSC unit primarily in aircraft leasing, pays a dividend to Skyline Leasing Unit B, which is also an IFSC unit primarily in aircraft leasing. Unit B gives Unit A a signed Form 1(N) for the tax year in which the dividend is payable. Unit A then pays the dividend without deducting TDS and lists the payment in its TDS statement. Without the form, the normal TDS rule would apply.
What you should do
If you receive the dividend, give the paying unit a completed Form 1(N) for the tax year the dividend is payable. It must be signed by a person allowed to sign an income tax return, under section 265 of the Act. If you pay the dividend, stop deducting TDS once you have the form, and show those payments in your TDS statement. If neither describes you, no action is needed.
If you do nothing
The document does not set out any penalty or interest for not filing Form 1(N). Without the form, the payer has no basis under this notification to skip TDS, so the normal deduction rule would apply. The document does not say more about the consequences.
The terms explained
- International Financial Services Centre (IFSC)
- A special zone set up for international financial business, as defined in the Special Economic Zones Act, 2005.
- TDS
- Tax deducted at source. The payer takes the tax out of a payment before paying the rest to the recipient.
- Statement-cum-declaration
- A single signed form that is both a statement of facts and a formal declaration that those facts are true.
- Tax year
- The 12-month period, running from 1 April to 31 March, in which income is counted for tax purposes.
- Unit (in IFSC)
- A business entity set up and operating inside an IFSC zone, as defined in the Special Economic Zones Act, 2005.
The original document
| Issued by | IT |
|---|---|
| Document | Notification Notification No. 141/2026 |
| Full title | CBDT has notified that no tax shall be deducted on dividend income paid by an International Financial Services Centre (IFSC) unit engaged in aircraft leasing to another IFSC unit engaged in aircraft leasing, subject to furnishing the prescribed Form No. 1(N), vide Notification No. 141/2026 dated 4 November 2026, with effect from 1 April 2026, under the Income-tax Act, 2025. |
| Issued on | 06 November 2026 |
| Effective | Deemed to have come into force on the 1st day of April, 2026. |
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