CBDT exempts TDS on Lease Rentals paid to Air Craft Leasing Units located in IFSC [Read Notification]

The Central Board of Direct Taxes (CBDT) has provided relaxation from TDS under section 194I of the Income Tax Act, 1961 in respect of lease rentals paid to aircraft-leasing units located in the International Financial Services Center (IFSC) claiming exemption under section 80LA of the Act. The exemption will come into force from 1^st July 2022.

The notification issued by the Board on Friday stated that “no deduction of tax shall be made under section 194-I of the Income-tax Act on payment in the nature of lease rent or supplemental lease rent, as the case may be, made by a person (hereafter referred as ‘lessee’) to a person being a Unit located in International Financial Services Center (hereinafter the ‘lessor’) for lease of an aircraft.”

However, the exemption is applicable subject to the following-(a) The lessor shall, – (i) furnish a statement-cum-declaration in Form No. 1 to the lessee giving details of previous years relevant to the ten consecutive assessment years for which the lessor opts for claiming deduction under sub-section (IA) read with section (2) of the section 80LA of the Income-tax Act; and (ii) such statement-cum-declaration shall be furnished and verified in the manner specified in Form No.1, for each previous year relevant to the ten consecutive assessment years for which the lessor opts for claiming deduction under sub-section (IA) read with section (2) of the section 80LA of the Income-tax Act. (b) The lessee shall, – (i) not deduct tax on payment made or credited to lessor after the date of receipt of copy of statement-cum-declaration in Form No. 1 from the lessor; and (ii) furnish the particulars of all the payments made to lessor on which tax has not been deducted in view of this notification in the statement of deduction of tax referred to in sub-section (3) of section 200 of the Income-tax Act read with rule 31A of the Income-tax Rules, 1962.

The Board further clarified that the above relaxation shall be available to the lessor during the said previous years relevant to the ten consecutive assessment years as declared by the lessor in Form No. 1 for which deduction under section 80LA is being opted. The lessee shall be liable to deduct tax on payment of lease rent for any other year.

The Principal Director General of Income-tax (Systems) or the Director-General of Income-tax (Systems), as the case may be, shall lay down procedures, formats and standards for ensuring secure capture and transmission of data and uploading of documents and the Principal Director General of Income-tax (Systems) or the Director-General of Income-tax (Systems) shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies, the notification said.

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