The CBDT has issued two notifications extending TDS relief to GIFT City’s International Financial Services Centre (IFSC) – this time targeting the aviation and shipping leasing sectors. Both notifications, dated 3rd July 2026, follow the same underlying logic as the broader IFSC TDS exemption, aimed specifically at lease rental payments.
The Two Notifications
Notification No. 74/2026 exempts TDS on lease rent or supplemental lease rent paid to an IFSC unit engaged in aircraft leasing.
Notification No. 75/2026 exempts TDS on lease rent or supplemental lease rent paid to an IFSC unit engaged in ship leasing.
They are, in effect, twin notifications – identical in structure and mechanism, differing only in whether the leased asset is an aircraft or a ship.
Why This Exists
GIFT City has been actively positioned by the government as a hub for aircraft and ship leasing – capital-intensive businesses that international investors typically run out of tax-efficient jurisdictions. Under Section 147 of the Income-tax Act, 2025, eligible IFSC leasing units already enjoy a 100% tax deduction on their income for a chosen block of 20 consecutive years (out of a 25-year window). These two notifications simply extend the same TDS relief mechanism used for other IFSC units – covered in our earlier post – to lease rental payments made in these two verticals, so that lessees are not forced to withhold tax that will ultimately be refunded anyway.
Who’s Involved
Lessor: The IFSC unit located in GIFT City that owns and leases out the aircraft or ship.
Lessee: The person or entity making the lease rent payments to that unit.
How the Exemption Works
The process mirrors the mechanism in Notification No. 80/2026 almost exactly:
- The lessor furnishes Form No. 1(N) – a statement-cum-declaration – to the lessee, specifying the 20 consecutive tax years for which it has opted to claim its deduction under Section 147.
- A fresh, verified declaration is required for each tax year within that opted period – it is not a one-time filing.
- Once the lessee receives the declaration, it stops deducting TDS on lease rent payments made from that point onward – there is no retroactive relief for payments made before the form was received.
- The lessee must still report these un-deducted payments in its regular TDS statement, keeping a compliance trail with the tax department even though nothing is withheld.
- The relief holds only for the specific 20-year period the lessor has declared. Outside that window, normal TDS provisions on lease rent apply again.
Effective Date
Both notifications have been given retrospective effect from 1st April 2026, even though notified on 3rd July 2026 – so they apply to the whole of the current tax year.
The Bottom Line
If your business leases aircraft or ships from a GIFT City-based IFSC unit, the practical takeaway is the same as with any other IFSC counterparty: before deducting TDS on lease rent payments, check whether a valid Form No. 1(N) declaration is on file from the lessor. If it is, TDS can be skipped for the declared period; if it is not, standard TDS provisions on lease rent continue to apply.
Download the Official Notifications:
To read the full details of Notification No. 74/2026 and Notification No. 75/2026, both dated 3rd July 2026, including their respective Form No. 1(N) formats, you can download the official documents from the following links:
Use TDSMAN Software to file seamless & error-free TDS / TCS returns, without any professional help.