Section 10(15A): Income Tax Exemption for Aircraft and Aircraft Engine Leasing
Section 10(15A) of the Income-tax Act, 1961 provided a specific exemption for qualifying income earned by a foreign government or foreign enterprise from leasing an aircraft or aircraft engine to an Indian company operating aircraft. The exemption depends on the identity of the recipient, the nature of the lease, and the date on which the lease agreement was entered into.
What does Section 10(15A) mean?
Under the Income-tax Act, 1961, Section 10 identifies specified incomes that are not included in total income when the statutory conditions are met. Clause (15A) deals specifically with income received by the government of a foreign State or a foreign enterprise from leasing aircraft or aircraft engines to an Indian company engaged in operating aircraft. This is an exclusion from taxable income for qualifying receipts, not a deduction available to the Indian lessee.
For this purpose, a foreign enterprise is an enterprise that is not an Indian enterprise, as understood under the applicable statutory wording. The legal identity of the lessor and the terms of the arrangement should be checked against the relevant version of the legislation.
Eligibility and scope of exemption
| Requirement | Explanation |
|---|---|
| Eligible recipient | The government of a foreign State or a qualifying foreign enterprise receiving lease income. |
| Indian lessee | An Indian company engaged in the business of operating aircraft. |
| Eligible asset | An aircraft or aircraft engine leased under a qualifying agreement. |
| Nature of exempt income | Qualifying income from leasing the aircraft or aircraft engine, subject to the statutory exclusions. |
| Amount exempt | The qualifying amount in full, if all applicable statutory conditions are satisfied. |
| Agreement date | Special restrictions apply to agreements entered into from 1 April 1997 to 31 March 1999 and to agreements entered into on or after 1 April 2007. |
Which aircraft lease agreements qualify?
The date of entering into the lease agreement is fundamental. The provision excludes agreements entered into between 1 April 1997 and 31 March 1999 and agreements entered into on or after 1 April 2007. Accordingly, a lease signed in a disqualified period cannot be brought within this exemption merely because payments are received later.
For an older qualifying agreement, review any subsequent renewal, extension, assignment, novation or material amendment. Whether it creates a new agreement is a legal question that turns on the documents and applicable law. Do not assume that every payment under an old commercial relationship remains exempt.
Payments not covered by the exemption
The exemption is not available for payments made for providing spares, facilities or services in connection with the operation of the leased aircraft. Where an agreement combines aircraft or engine rent with maintenance, spares, technical support, facilities or other services, the relevant components should be identified and analysed separately.
The exemption should not be applied automatically to unrelated services, standalone equipment supplies, or other income simply because the recipient is a foreign aircraft lessor.
Illustrative example
Suppose a foreign enterprise entered into a qualifying aircraft engine lease with an Indian airline in 2005. Subject to the full statutory requirements, its qualifying lease income may fall within Section 10(15A) under the 1961 Act. Separately invoiced maintenance and spares charges do not become exempt solely because they relate to the same aircraft engine. By contrast, a new aircraft lease agreement signed in 2010 would not qualify under this historical exemption.
Documentation and tax compliance
- Keep the executed lease agreement, amendments and renewal documents to establish the agreement date and legal terms.
- Verify the lessor's legal status and the Indian company's aircraft operating business.
- Maintain invoices and payment schedules distinguishing lease rentals from spares, facilities and services.
- Review applicable withholding-tax rules, treaty provisions and any other exemptions or special regimes separately; exemption under this clause should not be presumed for every cross-border aircraft payment.
- For newer aircraft leasing arrangements, evaluate the law governing the relevant tax year, including any applicable international financial services centre provisions, rather than relying on Section 10(15A).
Income-tax Act, 2025 and current-law verification
The Income-tax Act, 2025 applies from 1 April 2026. This article retains the established Section 10(15A) of the Income-tax Act, 1961 reference because it describes historical qualifying agreements and the treatment of periods governed by that Act. For tax years beginning under the new Act, confirm the corresponding provisions, savings and transitional rules in the enacted legislation and any subsequent amendments. This article does not assert that the historical exemption is newly available for post-2007 leases.
Official legal sources
- Income Tax Department - legislation, notifications and official tax guidance.
- India Code - statutory text of the Income-tax Acts and amendments.
- e-Gazette of India - enacted legislation and published notifications.
- Income Tax e-Filing Portal - tax filing and compliance services.
Frequently asked questions
Is all aircraft lease income exempt from Indian income tax?
No. Section 10(15A) applies only when its recipient, lessee, asset, agreement-date and income-type conditions are satisfied.
Does Section 10(15A) exempt aircraft maintenance charges?
No. Payments for spares, facilities or services connected with operation of the leased aircraft are excluded from this exemption.
Can a foreign lessor claim this exemption for an agreement entered into in 2026?
No, not under the historical Section 10(15A) exemption: the clause excludes agreements entered into on or after 1 April 2007. Other current-law provisions require separate examination.
Last reviewed: 10 October 2026. This is general legal and tax information; outcomes depend on the agreement and the law applicable to the relevant tax year.