Budget 2021 offers tax sops for aircraft leasing in GIFT City

Tax holiday on capital gains, tax exemption for aircraft lease rentals paid to foreign lessors

Union finance minister Nirmala Sitharaman today announced further tax incentives to encourage aircraft leasing in the country.

In her budget speech, Sitharaman said leasing companies setting up operations in the Gujarat International Financial Services (GIFT) City will be eligible for tax holiday on capital gains and tax exemption for aircraft lease rentals paid to foreign lessors.

In the 2019 budget,  the government had announced 15 year tax deduction for companies setting up operations in GIFT City. Rules and regulations for leasing operations are currently being drafted.

Indian airlines have a combined fleet of around 700 planes and over  85 per cent of them are on lease. A majority of lessors are based in Ireland due to its attractive tax policy. In recent years Chinese companies too have increased their share in aircraft leasing. With Indian carriers ordering over 900 aircraft, the government wants to encourage leasing companies to set up base in India.

"Tax incentives is a good step to build helicopter and general aviation (private and charter) segment in the country. These segments are underpenetrated as lease financing is not available. We have only around 200 helicopters in India and there is opportunity to grow the size. With proper financial structuring it could also encourage domestic investment in aircraft leasing business," said aviation consultant Vishok Mansingh.