India Expands Tonnage Tax Scheme to Boost Inland Water Transport

In a significant move to strengthen the domestic shipping sector, the Indian government has proposed an expansion of the tonnage tax scheme to encompass inland vessels. This initiative, outlined in the Income Tax Bill, 2025, seeks to promote inland waterways as a viable mode of transportation and improve the financial viability of shipping companies. 

Previously, the tonnage tax scheme was limited to sea-going ships registered under the Merchant Shipping Act, 1958. The proposed amendment will extend these benefits to vessels registered under the Inland Vessels Act, 2021, thereby encouraging investment in inland water transport infrastructure. 

Industry experts have lauded this development. Rakesh Singh, Secretary of the ICC Shipping Association, noted that including inland vessels in the tonnage tax regime will attract new investments and improve cash flow for Indian shipping companies operating both sea-going and inland vessels. 

The tonnage tax scheme allows shipping companies to be taxed based on the cargo capacity of their vessels rather than their actual income, offering a more predictable and often lower tax liability. By extending this scheme to inland vessels, the government aims to make inland water transport more competitive and financially sustainable.

This proposal aligns with broader government efforts to revitalize the maritime sector. The Union Budget 2025-26 introduced several incentives, including the establishment of Shipbuilding Clusters to enhance shipbuilding capabilities and the creation of a Maritime Development Fund with a corpus of ₹25,000 crore to provide long-term financing for the maritime industry. 

By expanding the tonnage tax scheme to include inland vessels, the government aims to bolster the inland water transport sector, reduce logistical costs, and promote sustainable transportation solutions across the country.

For any enquiries or information, contact info@thelawreporters.com or call us on +971 52 644 3004. Follow The Law Reporters on WhatsApp Channels