Aircraft Leasing IFSC Units aren’t Liable to Deduct Tax at Source on Dividends Paid Among Themselves | CBDT

Notification No. 52/2023, dated 20-07-2023

The Finance Act 2023 has introduced a new clause (34B) in Section 10 of the Income-tax Act. This clause exempts divide

nd income earned by an International Financial Services (IFSC) unit primarily engaged in the aircraft leasing business. The exemption is subject to the condition that the company paying the dividend should also be an IFSC unit engaged in the aircraft leasing business.

In order to bring uniformity with tax deduction provisions, the Central Board of Direct Taxes (CBDT) issued a notification to exempt such dividend income from levy of TDS provisions. The CBDT granted exemption from tax deduction at source under section 194 from dividend income paid by a unit of IFSC engaged in aircraft leasing business to a unit of IFSC engaged in the same business.

Further, the notification specifies that the payee shall:

a) 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 section 10(34B) of the Act is payable.

b) 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 section 10(34B) of the Act is payable.

Accordingly, the payer shall:

a) 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

b) Furnish the particulars of all the payments made to the recipient of such dividend on which tax has not been deducted in the statement of deduction of tax referred to in section 200(3), read with the rule 31A of the Income-tax Rules, 1962.

The notification shall be applicable from September 01, 2023.

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