Union Budget 2026-27 - Finance Bill, 2026

Chapter XIII-G of the Act provides for special provisions relating to income of shipping companies. Vide Finance Act, 2025, benefit of tonnage tax scheme under the said Chapter was extended to Inland vessels registered under Inland Vessels Act, 2021 to promote the inland water transportation.

2. Certain modifications are required in provisions of the said Chapter for aligning them with the Inland Vessels Act, 2021, and rules made thereunder in order to give effect to Tonnage tax scheme extended to inland vessels.

3. In view of the above, it is proposed to make the following amendments: -

(I) Section 227 of the Act relates to computation of tonnage income. Sub-section 4 of the said section provides that the tonnage shall mean the tonnage of a ship or inland vessel, as the case may be, indicated in the certificate referred to in sub-section (9) of the said section. It is proposed to replace the term “certificate” with “valid certificate” in sub-section (4)(a) of the said section for providing clarity.

(II) Section 227(9)(b)(iii) of the Act provides that in the case of inland vessel registered in India, valid certificate is defined as a certificate issued under the Inland Vessels Act, 2021. However, representation was received that no separate Tonnage Certificate is issued under the Inland Vessels Act, 2021 and “Certificate of registration” issued under the Inland Vessels Act, 2021 states the Net Tonnage of the vessel. Accordingly, the word “certificate” is proposed to be replaced with “certificate of registration” issued under the Inland Vessels Act, 2021 in the aforesaid provision.

(III) Section 228 of the Act relates to relevant shipping income and exclusion from book profit. Sub-section (3)(b)(ii)(A) of the said section provides that on-board or on-shore activities of passenger ships would be included in the core activities of a tonnage company. It is proposed to amend the said provision to bring inland vessels under its purview.

(IV) Section 232 of the Act relates to certain conditions for applicability of tonnage tax scheme. Sub-section (12) of the said section provides that a tonnage tax company shall comply with the minimum training requirement in respect of trainee officers as per the guidelines issued by the Director-General of Shipping and notified by the Central Government. It is proposed to amend sub-section (12) to insert reference to guidelines related to minimum training requirements in case of inland vessels issued by Inland Waterways Authority of India and notified by the Central Government.54

(V) Sub-section (13) of the section 232 of the Act states that a tonnage tax company is required to furnish a copy of the certificate issued by the Director-General of Shipping to the effect that such company has complied with the minimum training requirement as per the relevant guidelines along with the return of income under section 263. Since the designated authority for vessels under Merchant Shipping Act, 1958 and the Inland Vessels Act, 2021 differ, it is proposed to amend the said sub-section to refer to the designated authority in respect of inland vessels.

(VI) Sub-section (17) of the section 232 of the Act provides that the average of net tonnage shall be computed in the manner prescribed, in consultation with the Director-General of Shipping. It is proposed to amend sub-section (17) to add reference to Inland Waterways Authority of India, in case of inland vessels.

(VII) Section 235 relating to definitions pertaining to Chapter XIII-G is also proposed to be amended to provide for definition of “Inland Waterways Authority of India”.

4. The amendment will take effect from the 1st day of April, 2026 and will, accordingly, apply to tax year 2026-27 and subsequent tax years.

[Clause Clauses 52,53,54,55]

 

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Full Text:

Union Budget 2026-27 - Finance Bill, 2026

Tonnage tax scheme extended to inland vessels with registration, training, and tonnage computation changes effective April 2026. Amendments to Chapter XIII-G clarify that tonnage computation uses a 'valid certificate' and, for inland vessels, the 'certificate of registration' under the Inland Vessels Act, 2021; extend core activity coverage to include inland vessel passenger activities; require compliance with minimum training guidelines issued by the Inland Waterways Authority of India where applicable and adjust the compliance-certificate requirement to refer to the designated authority for inland vessels; add IWAI consultation for average net tonnage computation; and provide a definition of IWAI. Amendments take effect 1 April 2026 and apply to tax year 2026-27 and subsequent years.