Section 115VF of the Income-tax Act, 1961: Tonnage Income Explained

Section 115VF explains how a qualifying shipping company's taxable tonnage income is determined under the special tonnage tax scheme, rather than taxing the same relevant shipping income again under the normal computation rules.

What Section 115VF provides

Subject to the other provisions of Chapter XII-G, the tonnage income of a tonnage tax company is computed in accordance with Section 115VG. The amount so computed is deemed to be profits chargeable under the head Profits and gains of business or profession. The relevant shipping income referred to in Section 115V-I(1) is not charged separately to tax.

This is a special statutory method for measuring taxable income; it is not a blanket exemption for all receipts of a shipping company.

Meaning of important terms

Tonnage income

The notional income determined using the statutory tonnage-based calculation for qualifying ships. It is distinct from actual freight receipts or accounting profit.

Tonnage tax company

A company covered by the tonnage tax scheme after satisfying the statutory conditions and making a valid option. See Section 115VC and the option requirements in Section 115VP.

Qualifying ship

A vessel satisfying the statutory registration, tonnage, certification and other conditions, subject to exclusions. See Section 115VD.

Relevant shipping income

Income from eligible core and permitted incidental shipping activities as specified in Section 115V-I. Other income may remain taxable under the ordinary provisions.

How tonnage income is calculated

1. Identify the qualifying ships operated by the company during the relevant period.
2. Determine each ship's qualifying net tonnage and the applicable daily tonnage income under Section 115VG.
3. Multiply the daily tonnage income by the number of eligible operating days.
4. Add the amounts for all qualifying ships to obtain the company's tonnage income for the year.

The statutory calculation uses prescribed slabs and rounding rules. Actual profits or losses from eligible shipping operations do not replace the computed tonnage income.

Illustrative example

Suppose a qualifying ship has a daily tonnage income of Rs. 2,000 under the applicable statutory calculation and is operated as a qualifying ship for 300 days. Its tonnage income would be Rs. 6,00,000 (Rs. 2,000 multiplied by 300). This illustration assumes the daily amount has already been correctly determined under Section 115VG; it does not represent a statutory rate.

Income-tax Act, 2025: Corresponding provisions

The Income-tax Act, 2025 applies from 1 April 2026. Section 226(7) carries the principal rule previously found in Section 115VF: tonnage income is computed under Section 227, treated as taxable business profits, and relevant shipping income under Section 228(1) is not separately chargeable to tax.

For earlier assessment years, consult the applicable version of the Income-tax Act, 1961 and the relevant transitional provisions.

Frequently asked questions

Is tonnage income based on the shipping company's actual profit?

No. The scheme computes a statutory amount using qualifying tonnage and operating days, subject to the detailed provisions.

Is all shipping income exempt under Section 115VF?

No. The provision prevents separate taxation of defined relevant shipping income when the scheme applies. Ineligible or non-shipping income may be taxed under other rules.

Can every shipping company use the tonnage tax scheme?

No. The company must satisfy qualifying conditions and make a valid statutory option.

Official legal references

Updated 27 October 2026. This article provides general statutory information; applicability depends on the relevant tax year and facts.