No TDS on Ship Lease Rent Paid to IFSC Units
You do not need to deduct tax on ship lease payments if your lessor is an authorized IFSC unit and provides Form 1(N).
- Document
- Notification Notification No. 75/2026
- 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 provide Form 1(N) to confirm their eligibility for tax deductions.
- Lessees must report these non-deducted payments in their regular tax filings.
- This rule applies to ship lease and supplemental lease rent payments.
In short
Notification 75/2026 explains how businesses can stop deducting Tax Deducted at Source (TDS) when paying ship lease rent to units in an International Financial Services Centre (IFSC).
What has changed
How it worked before
Previously, there was no specific exemption process for ship lease rent payments made to IFSC units under these tax provisions.
What has changed
The government now allows you to skip TDS on ship lease payments if the lessor is an IFSC unit that has formally opted for specific tax benefits and provided you with a signed Form 1(N).
Who this affects
This affects you if you are a business or individual paying ship lease rent to a lessor located in an International Financial Services Centre (IFSC).
An example
A shipping company leases a vessel from a financial unit based in an IFSC. The lessor provides the shipping company with a signed Form 1(N) declaring their eligibility for tax benefits. Upon receiving this form, the shipping company stops deducting TDS from the monthly lease rent payments. The company then includes these payments in their standard TDS return filings.
What you should do
Ask your lessor for a completed Form 1(N). Once received, stop deducting TDS on their lease payments and ensure you report these payments in your TDS returns as required by law.
If you do nothing
If you fail to deduct TDS without having a valid Form 1(N) on file, you may be held liable for the tax that should have been deducted. You could also face interest charges or penalties for incorrect tax reporting.
The terms explained
- TDS
- Tax Deducted at Source; tax collected by the payer.
- IFSC
- International Financial Services Centre; a specialized financial zone.
- Lessor
- The person or company renting out the ship.
- Lessee
- The person or company paying rent to use the ship.
The original document
| Issued by | IT |
|---|---|
| Document | Notification Notification No. 75/2026 |
| Full title | CBTD has issued a Notification No. 75/2026 – Non-Deduction of TDS on Ship 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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