Budget 2021: Tax incentives for aircraft lessors to set up shop at GIFT City
- The latest proposal by the government is expected to have a positive impact on for the sector in the long run, industry experts said
- Finance minister Nirmala Sitharaman, in her budget speech, said that aircraft leasing companies that set up shop at GIFT City will be eligible for tax exemptions and other benefits
New Delhi: In a bid to attract foreign aircraft lessors to set shop in India, the government on Monday rolled out tax incentives for companies that are willing to set up shop at the International Financial Services Centre (IFSC) in GIFT City (Gujarat).
Finance minister Nirmala Sitharaman, in her budget speech, said that aircraft leasing companies that set up shop at GIFT City will be eligible for tax exemptions and other benefits.
"....the Government is committed to make the International Financial Services Centre (IFSC) in GIFT City a global financial hub. In addition to the tax incentives already provided, I propose to include, among others, tax holiday for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors," Sitharaman said.
"In order to promote IFSC, It is proposed to provide more tax incentives which includes tax holiday for capital gains incomes of aircraft leasing company, tax exemptions for aircraft lease rental paid to foreign lessor, tax incentive for re-location of foreign funds in IFSC and tax exemptions to investment division of the foreign banks located in IFSC," said the proposal made by the finance minister in the budget speech.
The latest proposal by the government is expected to have a positive impact on for the sector in the long run, industry experts said.
"Tax exemption was necessary to create a starting base for investors to consider this seriously," said Kapil Kaul, Chief Executive Officer-Indian Subcontinent & Middle East at CAPA.
"This measure is significant for multiple reasons. First, it will provide some relief to Indian carriers which are bleeding cash because of the Covid-19 pandemic. Second, the proposal sits well with India’s desire to develop a local aircraft leasing and financing industry to accelerate the maturity and ‘Atmanirbharta’ of the Indian aviation industry. Third, tax support for aircraft leasing and rentals will help grow the fleet size in India as a vast majority of these aircraft will likely be leased," said Remi Maillard, Chair, Civil Aviation Committee of FICCI and President & MD, at Airbus India & South Asia.
Maillard, however, added that while the aviation industry welcomed the budget announcements, it continues to hope for financial and policy support from the government.
"Immediate credit support, lower tax rates on aviation fuel and imported aircraft parts for MRO, flexible use of the airspace and fully liberalized code sharing, among others, can make the Indian aviation industry not only more competitive but also distinctly attractive," he added.
While presenting the budget, Sitharaman also said that the privatization of national carrier Air India Limited will be completed during the upcoming financial year 2021-22.
The government will also privatize airports operated by state-owned Airports Authority of India (AAI) at tier two and three cities during fiscal year 2021-22, Sitharaman added.
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First Published:1 Feb 2021, 07:44 PM IST
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