Computation of tonnage income
[Section-227 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 227(1) of Income Tax Act 2025
227(1) The tonnage income of a tonnage tax company for a tax year shall be the aggregate of the tonnage income of each qualifying ship computed as per sub-sections (2) and (3).
Section 227(2) of Income Tax Act 2025
227(2) For the purposes of sub-section (1), the tonnage income of each qualifying ship shall be computed as per the following formula:––
TI= DTI x N
where,—
- TI = the tonnage income of each qualifying ship;
- DTI = the daily tonnage income of each qualifying ship;
- N = the number of days, in the tax year, or in part of the tax year in case the ship is operated by the company as a qualifying ship for only part of the tax year.
Section 227(3) of Income Tax Act 2025
227(3) For the purposes of sub-section (2), the daily tonnage income of a qualifying ship having tonnage referred to in column A of the Table below shall be the amount specified in the corresponding entry in column B thereof.
Table
| Sl. No. | Qualifying ship having net tonnage | Amount of daily tonnage income |
|---|---|---|
| 1 | Up to 1,000. | ₹ 70 for each 100 tons |
| 2 | Exceeding 1,000 but not more than 10,000. | ₹ 700 plus ₹ 53 for each 100 tons exceeding 1,000 tons. |
| 3 | Exceeding 10,000 but not more than 25,000. | ₹ 5,470 plus ₹ 42 for each 100 tons exceeding 10,000 tons. |
| 4 | Exceeding 25,000. | ₹ 11,770 plus ₹ 29 for each 100 tons exceeding 25,000 tons. |
Section 227(4) of Income Tax Act 2025
227(4) In this Part, the tonnage shall—
- (a) mean the tonnage of a ship or inland vessel, as the case may be, indicated in the certificate referred to in sub-section (9); and
- (b) include the deemed tonnage, being the tonnage in respect of an arrangement of purchase of slots, slot charter and an arrangement of sharing of break-bulk vessel, computed in the manner, as prescribed.
Section 227(5) of Income Tax Act 2025
227(5) The tonnage shall be rounded off to the nearest multiple of hundred tons and for this purpose any tonnage consisting of kilograms shall be ignored and if the tonnage so rounded off, as per clause (a), is not a multiple of hundred, then, if the last figure in that amount is,—
- (a) fifty tons or more, the tonnage shall be increased to the next higher tonnage;
- (b) less than fifty tons, the tonnage shall be reduced to the next lower tonnage,
which is a multiple of hundred and the tonnage so rounded off shall be the tonnage of the ship for the purposes of this section.
Section 227(6) of Income Tax Act 2025
227(6) No deduction or set off shall be allowed in computing the tonnage income under this Part, irrespective of anything contained in any other provision of this Act.
Section 227(7) of Income Tax Act 2025
227(7) Where a qualifying ship is operated by two or more companies by way of––
- (a) joint interest in the ship; or
- (b) an agreement for the use of the ship,
and their respective shares are definite and ascertainable, the tonnage income of each such company shall be an amount equal to a share of income proportionate to its share of that interest.
Section 227(8) of Income Tax Act 2025
227(8) Subject to the provisions of sub-section (7), where two or more companies are operators of a qualifying ship, the tonnage income of each company shall be computed as if each had been the only operator.
Section 227(9) of Income Tax Act 2025
227(9) In this Part,––
- 227(9)(a) the tonnage of a ship or inland vessel, as the case may be, shall be determined as per the valid certificate indicating its tonnage;
- 227(9)(b) “valid certificate” means,—
- (i) in case of ships registered in India,—
- (A) having a length of less than twenty-four metres, a certificate issued under the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 made under the Merchant Shipping Act, 1958;
- (B) having a length of twenty-four metres or more, an international tonnage certificate issued under the provisions of the Convention on Tonnage Measurement of Ships, 1969, as specified in the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 made under the said Act;
- (ii) in case of ships registered outside India, a licence issued by the Director-General of Shipping under section 406 or 407 of the Merchant Shipping Act, 1958 specifying the net tonnage on the basis of Tonnage Certificate issued by the Flag State Administration, where the ship is registered or any other evidence acceptable to the Director-General of Shipping produced by the ship owner while seeking permission for chartering in the ship;
- (iii) in case of inland vessel registered in India, a certificate issued under the Inland Vessels Act, 2021.
- (i) in case of ships registered in India,—
FAQs on Section 227 of Income Tax Act 2025
What is tonnage income under Section 227 of the Income Tax Act, 2025?
Tonnage income is the income computed for a tonnage tax company in a tax year based on the tonnage of each qualifying ship it operates, as per the formula and table prescribed in Section 227.
How is tonnage income of a qualifying ship calculated?
Tonnage income (TI) = Daily Tonnage Income (DTI) × Number of days (N) the ship is operated as a qualifying ship during the tax year.
What determines the Daily Tonnage Income (DTI)?
DTI is determined based on the net tonnage of the qualifying ship using the slab rates specified in the table under Section 227(3).
What are the slab rates for computing daily tonnage income?
- Up to 1,000 tons: ₹70 per 100 tons
- 1,001 to 10,000 tons: ₹700 + ₹53 per 100 tons exceeding 1,000
- 10,001 to 25,000 tons: ₹5,470 + ₹42 per 100 tons exceeding 10,000
- Above 25,000 tons: ₹11,770 + ₹29 per 100 tons exceeding 25,000
How is net tonnage rounded off for the purpose of computation?
Net tonnage is rounded to the nearest multiple of 100 tons. If the remaining is 50 tons or more, it’s rounded up; if less than 50, it’s rounded down.
Can deductions or set-offs be applied to tonnage income?
No, Section 227(6) explicitly disallows any deductions or set-offs in the computation of tonnage income.
What is meant by deemed tonnage?
Deemed tonnage includes tonnage from slot charter arrangements, slot purchases, or break-bulk sharing, and is computed as prescribed under the rules.
What happens if a ship is operated for only part of the tax year?
The number of days (N) in the formula considers only those days during which the ship qualifies as a qualifying ship in that part of the tax year.
How is tonnage determined for Indian registered ships?
It is based on a valid certificate under the Merchant Shipping Act, 1958, using either domestic or international tonnage measurement rules, depending on the ship’s length.
How is tonnage determined for ships registered outside India?
Based on a license from the Director-General of Shipping under Section 406 or 407 of the Merchant Shipping Act, 1958, along with tonnage certification or accepted evidence from the Flag State.
How is tonnage of an inland vessel determined?
Through a certificate issued under the Inland Vessels Act, 2021.
How is income shared if a qualifying ship is jointly operated?
If the companies’ shares are definite and ascertainable, each company’s tonnage income is proportionate to its share in the joint operation.
If two or more companies jointly operate a ship, how is income computed?
Subject to defined shares, income is either allocated proportionately (Section 227(7)) or computed as if each was the sole operator (Section 227(8)).
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