Tonnage Tax Reserve requirement ties tonnage tax access to reinvestment in qualifying shipping assets under the Bill.
Clause 232 conditions tonnage tax access on crediting a specified portion of book profit from qualifying shipping activities to a Tonnage Tax Reserve Account, usable within eight years for acquisition of a new ship or inland vessel; interim restrictions prevent distribution or foreign remittance, and proportional re taxation, carryforward rules, and cessation of the option after sustained default enforce compliance.

Tonnage tax disqualification: companies face a ten-year bar on re-entry after opting out, default, or formal exclusion.
Clause 231(12) bars a qualifying company from opting for the tonnage tax scheme for ten years where the company: voluntarily opts out; defaults in complying with the specified compliance provisions; or has its option excluded by a formal exclusion order, with the disqualification period measured from the date of the triggering event.

Tonnage tax renewal requires timely application and procedural parity with initial grant, subject to eligibility and potential ineligibility period.
Clause 231(10) requires renewal of an approved tonnage tax option within one year from the end of the tax year in which the prior option ceases, with renewal discretionary and subject to approval or refusal by the competent authority. Clause 231(11) imports sub sections (1) to (10) to apply equally to renewals, ensuring procedural parity-application format, eligibility checks, opportunity of being heard, timelines and cessation consequences-but leaves unresolved whether benefits continue during pendency or whether delayed applications may be condoned.

Tonnage tax lock in establishes a multi year tenure and automatic cessation for qualification loss or compliance defaults.
Clause 231(8)-(9) provides that an approved tonnage tax option remains in force for ten years from the tax year of exercise, and ceases from the tax year in which the company ceases to qualify, defaults on compliance under section 232(1)-(20), is excluded under the exclusion provision, or voluntarily declares in writing to the Assessing Officer that the part will not apply; on cessation, shipping profits are computed under the general provisions of the Act.

Tonnage tax opting procedure ensures time-bound approval and procedural fairness under the updated legislative framework.
A qualifying company must apply in the prescribed form to the Joint Commissioner within the statutory window; the Commissioner may call for documents, must afford an opportunity of being heard before refusing, and must communicate a written order within a set time measured from the end of the processing quarter. On approval, the tonnage tax regime applies from the tax year in which the option is exercised, with transitional provisions for IFSC units and further clauses governing duration, cessation, renewal and a bar on re-entry.

Exclusion of book profits: tonnage tax income is removed from MAT computation to preserve the presumptive shipping regime.
Clause 228(16) excludes the book profit or loss derived from the activities of a tonnage tax company, as defined in Clause 228(1), from the company's book profit for the purposes of section 206, thereby preventing MAT from applying to profits attributable to qualifying core and incidental shipping activities; the exclusion operates alongside detailed provisions on caps for incidental income, allocation of costs and depreciation, treatment of non qualifying ships, and transfer pricing adjustments.

Capital gains on qualifying ships taxed under tonnage tax regime with WDV computed for block of qualifying assets.
Profits or gains on transfer of capital assets forming part of the block of qualifying ships are chargeable to income-tax, with capital gains computed under the capital gains provisions specified in the Bill. For that computation, references to "written down value of the block of assets" are to be read as the "written down value of the block of qualifying assets", and that WDV is to be determined by the method prescribed in sub-section (2) of Clause 229.

Tonnage tax loss set off limited to shipping income; pre option losses deemed set off and apportionment must be reasonable.
Clause 230(2)-(4) (and mirror Section 115VM) deem pre option losses attributable to the tonnage tax business to have been set off against relevant shipping income while under the tonnage tax regime, bar their set off against non shipping income after opting in, and require any necessary apportionment to be made on a reasonable basis, creating documentary and evidentiary obligations and potential disputes over apportionment and the definition of relevant shipping income.

Tonnage tax exclusion: carry forward and deductions barred, creating a self contained computation regime for shipping companies under new bill
Clause 230(1) creates a self contained tonnage tax computation by deeming all business losses, allowances and deductions to have been given full effect in their year of origin, prohibiting carry forward or set off of shipping business losses once under the tonnage regime, excluding general chapter based deductions from tonnage profits, and requiring written down values of assets to be computed as if depreciation had been claimed and allowed each relevant year.

Depreciation under tonnage tax: explicit WDV allocation formulas clarify asset classification and continuity of depreciation claims.
Clause 229(1)-(7) mandates that, on entering the tonnage tax regime, depreciation be computed on the written down value attributable to qualifying ships by dividing the existing block WDV between qualifying and non qualifying assets using explicit proportional formulas; separate qualifying asset blocks are created, WDV is transferred proportionally upon reclassification, intra year depreciation is apportioned by days of use, and the resulting WDV blocks are deemed carried forward from the preceding year to preserve continuity.

Allocation of shared costs and depreciation: apportionment on reasonable basis and fair proportion affects tonnage tax computations.
Clause 228(14) requires common costs attributable to the tonnage tax business to be allocated on a reasonable basis, with taxpayers maintaining records to support apportionment. Clause 228(15) requires depreciation for assets other than qualifying ships to be apportioned on a fair proportion determined by the Assessing Officer with reference to actual use. Both provisions mirror Section 115VJ, vesting discretion in the AO and preserving the objective of preventing tax arbitrage while increasing documentation and compliance burdens.

Tonnage tax regime: clarifies qualifying shipping income, market value inter company valuation, and related party anti avoidance adjustments.
Tonnage tax applies to qualifying shipping income measured by net tonnage, defined as profits from specified core shipping activities and prescribed incidental activities; incidental income above a prescribed threshold is excluded. Inter business transfers must be computed at market value, with assessing officer power to use reasonable bases in exceptional cases. Related party arrangements producing more than ordinary profits may be adjusted to reasonable levels. The Central Government may exclude activities or set limits by notification subject to parliamentary laying. Losses in tonnage computation are ignored.

Allocation of tonnage income: proportional or independent computation affects tax treatment of jointly operated qualifying ships.
Computation of tonnage income for jointly operated qualifying ships follows a two-step approach: where participating companies' shares are definite and ascertainable, income is allocated proportionately to each company; where shares are not definite and ascertainable, tonnage income for each operator is computed as if it were the sole operator. The rule aligns taxation with economic interest, creates documentary and compliance incentives, functions as an anti-avoidance measure, and may interact with cross-border tax rules, requiring clearer guidance on "definite and ascertainable" shares and documentation standards.

Tonnage tax regime: ships' taxable income computed by daily tonnage rates and aggregation, excluding deductions.
Clause 227(1)-(6) prescribes a ship wise tonnage tax: each qualifying ship's tonnage income equals its daily tonnage income multiplied by qualifying days, with daily rates set by a four tier slab linked to certified net tonnage. Tonnage includes certified physical tonnage and prescribed deemed tonnage for slot and sharing arrangements, rounded to the nearest hundred tons. A non obstante clause bars any deductions or set offs, making the computed tonnage income the exclusive tax base under the Part.

Tonnage tax scheme: deemed tonnage income treated as business profits, excluding actual shipping income under eligibility conditions.
Clause 226(7) mandates that tonnage income be computed under a separate formulaic provision and be deemed to be the profits chargeable under business income, while expressly excluding the actual "relevant shipping income" from tax once the tonnage computation applies; these effects are conditional on compliance with the Part's eligibility, option, separation, and record keeping requirements.

Tonnage tax scheme: elective presumptive taxation for shipping income, requiring separate accounting and exclusive computation under qualifying criteria.
The tonnage tax scheme is an elective presumptive regime requiring eligible companies operating qualifying ships to compute profits from that business exclusively under the tonnage basis; the tonnage tax business is treated as a separate business with independent computation and accounting, and companies not opting or ineligible must compute shipping profits under the normal provisions of the Act.

Qualifying ship definition governs tonnage tax eligibility by tying registration, certification, and operational use to tax benefit access.
The definition of qualifying ship in Clause 235(i) requires three operative conditions for tonnage tax eligibility: a minimum net tonnage, registration under the relevant shipping statute or an authorised foreign licence, and a valid certificate evidencing net tonnage. It lists explicit exclusions-vessels providing services normally provided on land, fishing vessels, factory ships, pleasure crafts, harbour and river ferries, offshore installations-and disqualifies vessels used for fishing beyond a specified threshold in a tax year, anchoring eligibility in maritime regulatory certification and operational use.

Place of effective management central to qualifying company status, restricting tonnage tax benefits to genuinely India-managed shipping firms.
The qualifying company for the tonnage tax regime must satisfy four cumulative conditions: be an Indian company; have its place of effective management in India-defined to include decisions made by executives as well as the board; own at least one qualifying ship; and have its main object as operating ships. Clause 235(h) consolidates these criteria within a broader definitional framework and references updated maritime legislation to clarify eligibility and reduce interpretive disputes.

Tonnage tax eligibility defined by operation status: owners and charterers qualify, long term bareboat lessors excluded.
Clause 226(1) treats a company as operating a ship or inland vessel if it owns or charters a vessel, including partial charters such as slot, space, or joint charters, and excludes companies that have chartered out vessels on bareboat charter or bareboat charter cum demise terms for periods exceeding three years, thereby distinguishing operational risk bearing operators from passive, long term financiers for purposes of the tonnage tax scheme.

Tonnage tax regime: option to compute shipping income on a tonnage basis with deeming treatment as business profits.
Clause 225 creates a self-contained tonnage tax regime for companies operating qualifying ships, allowing an option to compute income under its Part with a deeming provision treating that income as profits and gains of business; key operational questions concern the definition of qualifying ships, the option's exercise and lock-in mechanics, and interaction with loss set-off, allowances, and other tax measures.