In a significant boost to the aircraft leasing business at GIFT City, Gujrat, India, the Union finance ministry has said the dividend paid by a unit in an International Financial Services Centre that engages in aircraft leasing business to another such unit in an IFSC will not be subject to tax deducted at source (TDS).
The Central Board of Direct Taxes (CBDT) has notified these changes and also laid out conditions that these units will have to fulfil to avail the tax exemption. The payee would be required to furnish a statement-cum-declaration with the tax department to claim exemption. The notification comes into effect on September 1, 2023.
This follows the Union Budget 2023-24 where a clause was inserted in the Finance Act, 2023, to allow exemption in respect of dividend income earned by a unit in an IFSC engaged in the business of aircraft leasing provided the company paying dividend is also a unit in IFSC engaged in the business of aircraft leasing
Experts said the move will promote aircraft leasing business in the GIFT City as it brings tax parity with global hubs such as Dublin. The move will also benefit the airlines as an estimated 80-85% of carriers are funded through leases.