Income Tax Law / Shipping Industry
Section 115VU: Minimum Training Requirement for Tonnage Tax Companies
Section 115VU of the Income-tax Act, 1961 required companies using the tonnage tax scheme to meet prescribed training obligations for trainee officers, provide certification from the Director-General of Shipping and monitor consecutive years of non-compliance.
Updated: 27 October 2026 | Indian tax law
What does Section 115VU provide?
Under Chapter XII-G of the Income-tax Act, 1961, eligible shipping companies could elect to calculate qualifying shipping income under the special tonnage tax scheme. Section 115VU imposed a separate obligation to support the training of trainee officers. The requirement applied after the company's tonnage tax option was approved under Section 115VP(3).
A tonnage tax company means a company operating under an approved tonnage tax option, subject to the qualifying conditions of Chapter XII-G. The provision connects eligibility for a tax regime with maritime training obligations; it is not itself a method for computing the company's tonnage income.
Section 115VU explained subsection by subsection
Section 115VU(1): Compliance with minimum training requirements
Once approval under Section 115VP(3) was obtained, the tonnage tax company was required to comply with the minimum training requirement for trainee officers in accordance with guidelines framed by the Director-General of Shipping and notified in the Official Gazette by the Central Government.
The section itself does not prescribe a universal number of trainees, berths or training days. Those operational details must be checked against the applicable notified guidelines and official directions for the relevant period.
Section 115VU(2): Certificate and income-tax return
The company was required to furnish a copy of the certificate issued by the Director-General of Shipping along with its return of income under Section 139, confirming compliance with the applicable minimum training requirements for the relevant previous year.
Section 139 is the provision of the 1961 Act governing returns of income. The exact mechanism for attaching or electronically furnishing supporting records should be checked against the filing rules and portal requirements applicable to the relevant assessment year.
Section 115VU(3): Five consecutive years of non-compliance
If a company failed to meet the minimum training requirement for five consecutive previous years, its tonnage tax option ceased to have effect from the beginning of the previous year following the fifth consecutive year of failure.
This is a consecutive-year test: one isolated year of failure does not by itself meet the five-year condition in subsection (3), although other compliance consequences may still arise under the statutory framework.
Meaning of minimum training requirement
For the purpose of Section 115VU, the minimum training requirement is the training obligation established through the guidelines of the Director-General of Shipping and the Central Government's Gazette notification. The company should verify the applicable version of the guidelines, the relevant trainee officer categories and the manner of evidencing compliance.
Practical records may include trainee engagement details, training arrangements, vessel placement records, training periods, correspondence with the maritime authority and the official compliance certificate. These are recordkeeping examples, not additional requirements independently created by Section 115VU.
Certificate from the Director-General of Shipping
Subsection (2) expressly refers to a certificate issued by the Director-General of Shipping. Companies should seek the certificate through the process prescribed by the maritime authority, preserve a copy and ensure that the relevant tax-return disclosures are consistent with the certificate and supporting records.
The statutory text speaks of furnishing the certificate with the return under Section 139. For electronic returns and current-year procedures, verify the applicable return instructions rather than assuming that a paper attachment is accepted.
What happens after five consecutive years of failure?
| Issue | Effect under Section 115VU(3) |
|---|---|
| Trigger | Failure to comply with the minimum training requirement for five consecutive previous years. |
| Effective date | Beginning of the previous year following the fifth consecutive year of non-compliance. |
| Tax consequence | The tonnage tax option ceases to have effect; the company's tax treatment must then be reviewed under the other applicable provisions. |
| Related restriction | Section 115VS addresses the prohibition on opting into the scheme after specified defaults, subject to its terms. |
Illustration
Assume a company does not meet the applicable training requirement in five successive previous years, from Year 1 through Year 5. Under the former Section 115VU(3), its option would cease from the beginning of Year 6. The example illustrates the statutory sequence only; actual dates and consequences depend on the applicable legislation and facts.
Section 115VQ separately addressed the duration and cessation of an option, and Section 115VS addressed restrictions following certain defaults. Read these provisions together when assessing the historical scheme.
Compliance checklist for shipping companies
- Confirm that the company's tonnage tax option was approved under the applicable law.
- Identify the relevant Director-General of Shipping guidelines and Gazette notifications for each year.
- Maintain records showing training undertaken and the basis for satisfying the prescribed requirement.
- Obtain and preserve the Director-General of Shipping compliance certificate.
- Check the income-tax return and supporting-document procedures for the relevant assessment or tax year.
- Track failures by consecutive previous year and promptly assess any impact on eligibility.
- Review related obligations under Section 115VT, Section 115VV and Section 115VW.
Frequently asked questions
Who must comply with Section 115VU?
Under the 1961 Act, a tonnage tax company whose option had been approved under Section 115VP(3) was subject to the provision.
Does Section 115VU specify a fixed number of trainee officers?
No. The statutory provision refers to training requirements set through guidelines framed by the Director-General of Shipping and notified by the Central Government.
What document establishes compliance?
Subsection (2) refers to the certificate issued by the Director-General of Shipping for the relevant previous year.
Does one year of failure automatically end the tonnage tax option?
No. The cessation trigger expressly stated in subsection (3) requires failure for five consecutive previous years. Other statutory consequences should nevertheless be reviewed.
Is Section 115VU the operative section for every tax year after April 2026?
No. Tax years governed by the Income-tax Act, 2025 require reference to the corresponding operative legislation and rules.
Official legal and regulatory references
For current and historical law, consult the India Code legislative database, the Income Tax Department, the Directorate General of Shipping and the e-Gazette of India. For return filing and current procedural instructions, consult the Income Tax e-Filing Portal.
These official resources should be checked for the applicable amendments, notifications and guidance in force for the particular period.
This page provides general legal information and does not replace examination of the relevant legislation, Gazette notifications or professional advice.