No TDS on Aircraft Lease Rent Paid to IFSC Units
You do not need to deduct tax on aircraft lease payments if the lessor is an eligible IFSC unit.
- Document
- Notification Notification No. 74/2026
- Dated
- 06 Jul 2026
- Effective
- 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
- Lessees stop deducting tax after receiving Form 1(N) from the lessor.
- Lessors must be units located in an International Financial Services Centre.
- Lessors must formally opt for a twenty-year tax deduction period.
- Lessees must report these non-deducted payments in their regular tax statements.
In short
Notification No. 74/2026 allows businesses to pay aircraft lease rent to International Financial Services Centre (IFSC) units without deducting Tax Deducted at Source (TDS). This change exists to support aircraft leasing businesses operating within these specific financial zones.
What has changed
How it worked before
Previously, there was no specific exemption from deducting tax on these aircraft lease payments.
What has changed
You are now permitted to stop deducting tax on lease or supplemental lease rent once you receive a valid declaration from the lessor.
Who this affects
This applies if you are a business or person paying aircraft lease rent to a lessor located in an International Financial Services Centre.
An example
An airline company leases an aircraft from a firm based in an IFSC. The lessor provides the airline with a signed Form 1(N) declaring their twenty-year tax deduction period. The airline stops deducting TDS on the next rent payment and reports the payment amount in their tax statement as required.
What you should do
Ask your lessor for a completed Form 1(N). Once you receive it, stop deducting tax on their payments and include these payments in your standard tax deduction filings.
If you do nothing
If you fail to deduct tax when required, or fail to report the payments correctly, you may face penalties or interest charges for non-compliance with tax deduction rules.
The terms explained
- TDS
- Tax Deducted at Source; tax taken from payments before you receive them.
- IFSC
- International Financial Services Centre; a specialized financial zone with specific tax rules.
- Supplemental lease rent
- Additional payments made under an aircraft lease agreement, often for maintenance or repairs.
The original document
| Issued by | IT |
|---|---|
| Document | Notification Notification No. 74/2026 |
| Full title | CBTD has issued a Notification No. 74/2026 – Non-Deduction of TDS on Aircraft Lease Rent Paid to IFSC Units under Section 147 of the Income-tax Act, 2025. |
| Issued on | 06 July 2026 |
| Effective | 1st day of April, 2026 |
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