Purpose:
This section provides a 100% tax exemption to foreign companies on income earned from leasing cruise ships to Indian operators. The goal is to boost India’s maritime tourism and shipping industry by making it cheaper for Indian companies to lease cruise ships from foreign lessors.
Key Conditions for Exemption:
✅ Applicable to: Foreign companies leasing cruise ships (including luxury liners and passenger vessels).
✅ Type of Lease: Both wet lease (ship + crew + fuel) and dry lease (only ship).
✅ Approval Required: The lease agreement must be approved by the Central Government (Ministry of Shipping).
✅ Exemption Period: Full exemption on lease rental income during the lease period.
Example: Tax Exemption for Foreign Lessor of Cruise Ships
Scenario:
- Indian Company (Lessee):ABC Cruise Lines Ltd. (operates luxury cruises in India).
- Foreign Lessor:Global Cruise Leasing Co. (Singapore).
- Lease Agreement:ABC leases a cruise ship for $200,000 per month for 5 years.
Tax Treatment:
- Without Section 10(15B) Exemption:
- Lease payments to the foreign company would attract Withholding Tax (TDS @ 10%)under Section 195.
- Tax Deducted at Source (TDS):$20,000 per month (10% of $200,000).
- Net Payment to Foreign Lessor:$180,000 per month.
- With Section 10(15B) Exemption:
- Since the lease is approved by the Indian government, no tax is deducted.
- Taxable Income for Foreign Lessor:Zero (full exemption).
- Net Payment to Foreign Lessor:$200,000 (no tax deduction).
