Central Board of Direct Taxes notified that no tax shall be deducted under Section 393(1) [Table S.No. 2] of the Income-tax Act, 2025, on payments of lease rent or supplemental lease rent made by a lessee to a lessor being a Unit of an International Financial Services Centre engaged in ship leasing, subject to conditions specified in the notification.

The lessor is required to furnish a statement-cum-declaration in Form No. 1(N) to the lessee, specifying twenty consecutive tax years for which deduction under Section 147 is opted, furnished and verified for each such tax year. The lessee is required to not deduct tax on payments made after receipt of the declaration, and to report such payments in the statement of deduction of tax under Section 397(3)(b) read with Rule 219 of the Income-tax Rules, 2026. The relaxation is stated to apply only during the twenty consecutive tax years declared by the lessor; tax deduction applies for any other year. The Principal Director General/Director General of Income-tax (Systems) is designated to lay down procedures, formats and standards for data capture, transmission, document uploading, and security, archival and retrieval policies. The notification defines “ship” by reference to Schedule VI (Note 3) of the Income-tax Act, 2025, and “International Financial Services Centre” and “Unit” by reference to the Special Economic Zones Act, 2005.