The Indian government has issued a notification on 16 October 2020 to promote GIFT City IFSC as a hub for aircraft leasing in India.

Background

The Indian Finance Minister, during her Budget speech in July 2019, had announced that the Indian government would implement measures to make India a hub of aircraft financing and leasing. She had stated that as the world’s third largest domestic aviation market, the time is ripe for India to enter into aircraft financing and leasing activities. Earlier in January 2019, the Indian Government had come up with a report – Project Rupee Raftaar – in relation to the development of aircraft financing and leasing in India. The report outlines setting up operations in an International Financial Services Centre (IFSC) in India i.e. Gujarat International Finance Tec-City (GIFT City).

More recently, the Indian government has issued a notification setting out GIFT City IFSC as a hub for aircraft leasing in India by confirming ‘aircraft leasing’ as a financial product that could be transacted in the IFSC. The term ‘aircraft lease’ includes operating and financial lease and any hybrid of operating and financial lease of aircraft or helicopter and engines of aircraft or helicopter or any other part thereof.

Analysis

The notification is another step from the Indian government in the direction of establishing a framework for aircraft leasing in India. Currently, GIFT City IFSC provides a host of fiscal and tax incentives. The key corporate tax incentives include;

• Tax holiday to an IFSC unit of 100 percent of income for 10 consecutive years out of initial 15 years, subject to conditions,
• Reduced Minimum Alternate Tax rate of 9 percent (excluding surcharge and cess) for an IFSC unit deriving its income solely in convertible foreign exchange,
• No withholding tax on interest payable to a non-resident by an IFSC unit on overseas borrowings,
• Reduced withholding tax of 4 percent (excluding surcharge and cess) on interest on overseas borrowings by way of long-term bond or rupee denominated bond listed on an IFSC stock exchange.

In addition, there are benefits under indirect tax law, and other fiscal incentives.

Should you wish to learn more regarding the tax incentives for aircraft leasing in India please do not hesitate to contact us.