Extension of Tonnage Tax Scheme benefit to Inland Vessels to spur Water Transport in India:

Extension of Tonnage Tax Scheme benefit to Inland Vessels to spur Water Transport in India The tonnage tax scheme introduced under Chapter XII-G of the Finance Act, 2004, sought to encourage the Indian shipping industry by giving qualifying shipping companies the option to elect for the tonnage tax regime in lieu of the standard corporate tax regime. It has been proposed in an effort to further strengthen the inland water transportation sector by extending the benefits of this scheme even to inland vessels. India is today severely short of inland water transport vessels, which necessitates high capital investment in the sector. Aware of the necessity to promote growth by using inland water transportation, attempts have been made to absorb inland vessels in the tonnage tax. The scheme has been proposed for vessels coming within the purview of the Inland Vessels Act, 2021. For these inland vessels, Section 115VD of the Income Tax Act has defined an inland vessel, which make sures that it is eligible for income tax benefits in this tonnage tax regime. Other related provisions have also been amended to integrate inland vessels into the framework of the tonnage tax scheme effectively. This is going to spur investment in the inland water transportation sector, developing and enhancing its contribution to the overall logistics network of the country. These changes will be effective from April 1, 2026, and shall be applicable from the assessment year 2026-27. The government, by including inland vessels in the tonnage tax scheme, is taking a step toward greener transportation and away from old logistics methods. This change is part of a bigger plan to improve India's infrastructure and help the economy grow with a range of efficient transportation options.