TaxTMI 
TaxTMI 
Presumptive Taxation of Foreign Shipping Companies : Clause 316 of the Income Tax Bill, 2025 Vs. Section 172 of the Income-tax Act, 1961
X X X X Extracts X X X X
X X X X Extracts X X X X
....non-residents from occasional shipping business in India. The proposed Clause 316 under the Income Tax Bill, 2025, seeks to replace and update this framework, ushering in a new era with potentially far-reaching implications for non-resident shipping companies, Indian regulators, and the broader international trade ecosystem. This commentary provides a detailed analysis of Clause 316, elucidating its objectives, key provisions, and practical implications. It further undertakes a granular comparison with the existing Section 172, highlighting continuities, changes, and potential areas of legal and practical significance. Objective and Purpose The central objective of both Section 172 and Clause 316 is to ensure that income accruing to non-....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The provision applies to any ship, belonging to or chartered by a non-resident, carrying passengers, livestock, mail, or goods shipped at an Indian port. The scope is broad, covering both owners and charterers, and is agnostic to the location of payment (in India or abroad). 2. Deemed Income and Computation (Sub-section 2) Clause 316(2) introduces the core presumptive taxation mechanism: * Deemed Income: 7.5% of the amount paid or payable for such carriage is deemed to be income accruing in India to the non-resident owner or charterer, or any person acting on their behalf. * Inclusive Amounts: The deemed income includes amounts paid for demurrage, handling charges, or other similar charges. This approach simplifies computation, ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpowered to call for any accounts or documents necessary to determine the tax payable. This is a standard procedural safeguard, ensuring the integrity of the assessment process. 6. Port Clearance Conditions (Sub-section 8) A critical compliance mechanism is the linkage of tax payment or satisfactory arrangement thereof to the grant of port clearance by customs authorities. This ensures that tax dues are secured before the ship leaves Indian jurisdiction, providing a strong enforcement tool. 7. Option for Regular Assessment (Sub-sections 9 and 10) Clause 316(9) preserves the right of the ship owner or charterer to opt for a regular assessment of their total income for the tax year, as per the general provisions of the Act, before the end....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and Substantive Parity At first glance, Clause 316 and Section 172 are structurally and substantively similar, reflecting a conscious effort to preserve the established regime while updating the legislative text. Both provisions: * Apply to non-resident owners or charterers of ships carrying passengers, livestock, mail, or goods shipped at Indian ports. * Prescribe a presumptive income rate of 7.5% of the gross amount paid or payable. * Include demurrage, handling, and similar charges in the computation base. * Require the master to file a return before departure, with flexibility for deferred filing. * Link port clearance to tax payment or satisfactory arrangement. * Permit the option for regular assessment and adjustment of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner of Customs," while Section 172 refers to "Collector of Customs." The change reflects updated administrative titles. * Option for Regular Assessment: Section 172(7) allows the claim before the expiry of the assessment year relevant to the previous year of departure, whereas Clause 316(9) allows it before the end of the year following the tax year of departure. The practical effect may be similar, but the language is streamlined in Clause 316. 3. Potential Legal and Practical Issues * Definition of Tax Year: If the new Act defines "tax year" differently from the "previous year" or "financial year" under the 1961 Act, this could affect timelines for assessment and compliance. * Reference to Section 393(1): Stakeholders will need to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the regime without fundamentally altering its policy underpinnings. Conclusion Clause 316 under the Income Tax Bill, 2025, represents a careful and thoughtful update of the established regime for taxing the profits of non-residents from occasional shipping business in India. It preserves the core features of Section 172 of the Income-tax Act, 1961, while modernizing language, administrative references, and procedural details. The provision continues to provide a clear, predictable, and internationally aligned framework for the taxation of non-resident shipping income, balancing the needs of revenue, compliance, and international commerce. Stakeholders should pay close attention to definitional changes (such as "tax year"), cross-referen....