CBDT notifies Aircraft Lease Business unit under IFSC exempted from TDS u/s 194 from any Income in nature of dividend w.e.f. September 1st 2023 [Read Notification]

The Central Board of Direct Taxes (CBDT) vide notification no. S.O. 3254(E) published on 20th July 2023 has notified the exemption of income in nature of divided incurred by the aircraft lease business unit under International Financial Services Center from Tax Deduction at Source (TDS) under Section 194 of Income Tax Act, 1961. The notification shall come into force on September 1st 2023.

By virtue of the authority vested in it through sub-section (1F) of section 197A, in conjunction with clause (34B) of Section 10 of the Income tax Act, 1961, the Central Government declareD that no deduction of income tax shall be applicable under Section 194 of the Income-tax Act on any income categorized as dividend and paid by a unit of an International Financial Services Centre primarily involved in aircraft leasing (the payer) to a company, which is also a Unit of an International Financial Services Centre primarily engaged in aircraft leasing (the payee), subject to the following conditions:

(a) The payee shall, –

1. furnish a statement-cum-declaration in Form No. 1 to the payer giving details of previous year relevant to the assessment year in which the dividend income eligible for exemption under clause (34B) of section 10 of Income-tax Act is payable.
2. such statement-cum-declaration shall be furnished and verified in the manner prescribed in Form No. 1 for the previous year relevant to the assessment year in which the dividend income eligible for exemption under clause (34B) of section 10 of Income-tax Act is payable.

(b) The payer shall, –

1. not deduct tax on payment made or credited to the recipient of such dividend (payee) after the date of receipt of copy of statement-cum-declaration in Form No. 1 from payee; and
2. furnish the particulars of all the payments made to the recipient of such dividend 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 the rule 31A of the Income-tax Rules, 1962.

The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), depending on the scenario, will establish protocols, templates, and criteria to ensure the secure capture and transmission of data, as well as the uploading of documents. Additionally, the said official(s) will take responsibility for devising and executing suitable security, archival, and retrieval policies.

Explanation.- For the purpose of this notification,-

(a) “aircraft” shall have the same meaning assigned to it in the Explanation to clause (4F) of section 10 of the Income-tax Act;

(b) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005; and

(c) “Unit” shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005.

The notification also states to furnish Form No. 1, a statement-cum-declaration by a Unit engaged in the business of leasing of aircraft (deductee/payee) located in International Financial Services Centre to a Unit of International Financial Services Centre (deductor/payer).

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