Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: due date for vat payment :: articles on VAT and GST in India :: VAT Audit :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment :: list of goods taxed at 4% :: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARD :: cpt :: TDS :: form 3cd :: VAT RATES
News Headlines »
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful
 Your deposit may draw income tax notice
 Accepting payment under IDS 2016
 New disclosure scheme could see 50% tax and 4-year limit on cash use for unaccounted deposits
 Pay 50% tax on unaccounted deposits, or 85% if caught, says Modi government
 Deadline to pay property tax in old currency extended
 Cabinet clears amendments to Income Tax Act

Tax clouds over aircraft leasing
February, 03rd 2007

The domestic airline industry may be in for a heavy blow of Rs 650 crore next fiscal if early indications on tax proposals are anything to go by. The finance ministry is toying with the idea of withdrawing the exemption on withholding tax for lease rentals of aircraft. This would translate into higher airline tariffs for fliers as aviation companies are likely to pass on the tax burden to passengers.

The levy was kept in abeyance to allow Indian and Air India to expand their fleets through leased aircraft. The finance ministry has now indicated the exemption may be scrapped. It is likely to be withdrawn from April 1 on aircraft as well as engine lease. Over two-thirds of the domestic carriers current fleet of 240 aircraft are on short- and long-term lease while the remaining one-third are owned by the airlines.

The non-availability of the exemption will significantly increase domestic carriers fleet-acquisition costs, according to Federation of Indian Airlines (FIA) chairman and Air India CMD V Thulasidas.

However, the finance ministry, which is looking at axing exemptions to expand the tax base, is not in favour of extending the benefits available to airlines, an official said.

In 2006, the Central Board of Direct Taxes had put out a list of tax exemptions on its Website to get public views on which ones should be withdrawn. It is likely that the government would first touch the exemptions available to corporate sector rather than those available to individuals.

Withholding tax rates vary between 10% and 48%, depending on the country the lessor is registered with. The domestic carriers have various expansion plans lined up with airline companies likely to add over 450 aircraft to their existing fleets. The plans may become more costly after the exemption on withholding tax under Section 10(15A) of the Income-Tax Act is withdrawn. The exemption is valid to lease deals signed till March 31, 2007. To hedge themselves against this, some of the airliners are looking at finalising their lease agreement before March 31, 2007.

While the tax levy may not lead to a cut in expansion plans of the airlines companies, they may pass some of the additional cost on to passengers. If the exemption is withdrawn, it would lead to increase in costs by at least Rs 60 per seat, assuming an average withholding tax of 10%, explained the director of a leading low-cost carrier.

Explaining the tax calculations, CEO of a low-cost carrier said, The average monthly lease rent of an Airbus A320-type aircraft is about 1% of the price value, which turns out to be $400,000 per month per plane. Assuming an average 20% withholding tax, it would result in yearly tax of $960,000 per plane.

A ballpark estimate for 150 aircraft leased by domestic carriers, at 20% tax, would result in total tax of over Rs 650 crore in a year. This is expected to significantly affect costs and profits of the aviation industry, which is likely to incur losses of Rs 2,000 crore this fiscal.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Mission

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions