Definition
Tonnage Tax
Tonnage tax is a presumptive tax regime for shipping companies that bases tax on the tonnage of ships operated rather than on actual profits.
Shipping profits are volatile and globally mobile, so many countries offer a tonnage tax to keep their fleets competitive. Under this optional regime, an Indian shipping company's taxable income from operating qualifying ships is computed on a notional basis tied to each ship's tonnage and days operated, rather than its real profit.
The scheme provides certainty and a typically lower effective tax, encouraging companies to flag and operate ships from India. Once a company opts in, it must stay for a lock-in period, similar in spirit to other presumptive taxation schemes.
Related terms
- Customs DutyCustoms duty is the tax levied on goods imported into, or in some cases exported from, India, administered under the Customs Act.
- Minimum Alternate Tax (MAT)Minimum Alternate Tax ensures that profitable companies which reduce their tax to near zero through exemptions still pay a minimum tax on their book profits.
- Presumptive Taxation 44ADSection 44AD lets eligible small businesses declare income at a prescribed percentage of turnover instead of maintaining detailed books, simplifying compliance.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.