Indian income tax | Aircraft leasing | Section 10(6BB)

Section 10(6BB): Exemption for Tax Paid on Aircraft Leasing Income

Section 10(6BB) of the Income-tax Act, 1961 provided a specific exemption where the Government of India or an Indian company paid Indian income tax on qualifying aircraft or aircraft-engine lease income of a foreign government or foreign enterprise.

Important distinction: The exemption concerns the income tax paid on behalf of the foreign lessor, not an automatic exemption for all aircraft lease rentals. Its availability depends on the contract, statutory dates and the law applicable to the relevant tax year.

Who qualifies and what is exempt?

Relevant provision	Section 10(6BB), Income-tax Act, 1961 (historical provision).
Eligible recipient	Government of a foreign State or a foreign enterprise meeting the statutory definition.
Underlying income	Income derived from leasing an aircraft or aircraft engine to the Government of India or an Indian company under a qualifying agreement.
Exempt amount	The amount of Indian income tax paid by the Government of India or the Indian company on behalf of the foreign lessor, to the extent covered by the provision.
Contract condition	The agreement must fall within the specified statutory periods and satisfy the required Central Government approval condition, where applicable.

Meaning of Section 10(6BB)

The provision addressed a tax-paid-by-payer arrangement: an Indian government body or company agrees to bear the Indian tax attributable to qualifying lease income of a foreign lessor. Normally, tax borne by another person may itself create a taxable benefit or require grossing up. Section 10(6BB) excluded the specified tax-paid amount from the recipient's total income when its conditions were met.

A foreign enterprise for this purpose means a person who is a non-resident. A lease is an arrangement permitting the use of an aircraft or aircraft engine in return for consideration, subject to its contractual terms.

Conditions for exemption

Eligible lessor: The recipient must be a foreign State government or qualifying foreign enterprise.
Qualifying asset: The underlying income must arise from leasing an aircraft or an aircraft engine, rather than separately supplied spare parts, facilities or operational services.
Indian payer: The Government of India or an Indian company must pay the tax under the relevant arrangement.
Agreement dates: The historical provision refers to agreements entered into after 31 March 1997 but before 1 April 1999, or after 31 March 2007, subject to the applicable statutory wording and amendments.
Approval: Check whether Central Government approval was required for the particular agreement and period, and retain the approval where relevant.
Documentary support: The lease agreement, tax-payment records and evidence of the lessor's non-resident status should support the claim.

What is not covered?

The exemption is not a blanket exclusion for the aircraft rental itself, nor for amounts earned from providing spares, maintenance, facilities, crew or other services merely because they relate to an aircraft. Such payments require separate classification under domestic tax law, applicable withholding rules and, where relevant, an income-tax treaty.

Illustrative example

Assume an Indian company leases an aircraft engine from a qualifying non-resident enterprise and, under an eligible agreement, pays the Indian income tax attributable to the lease income. If all requirements of Section 10(6BB) are satisfied, the tax paid by the Indian company is excluded from the foreign enterprise's total income under that provision. The underlying lease payment must still be evaluated independently for Indian taxation and withholding.

Current-law position and transition

The Income-tax Act, 2025 applies from 1 April 2026. Section 10(6BB) is a reference to the Income-tax Act, 1961, relevant for periods governed by that Act and any applicable transitional or saving provisions. For a payment or assessment governed by the 2025 Act, verify the corresponding provisions and current statutory text before relying on this historical section number. The exemption should not be assumed to apply merely because an agreement involves a foreign aircraft lessor.

For cross-border lease transactions, also examine the applicable double taxation avoidance agreement, the character of the payment, and the relevant withholding-tax obligations. These are separate from the tax-paid exemption.

Records to maintain

Executed aircraft or engine lease agreement and amendments, including agreement date.
Central Government approval or other evidence required by the relevant version of the law.
Details of the lessor, tax residence and non-resident status.
Lease invoices, tax computations, tax deposit challans and withholding documents.
Breakdown of lease rent versus services, spares and other separately charged items.

Official legal resources

This article is a general explanation of the historical Section 10(6BB) exemption, updated 10 October 2026. Apply the law and notifications relevant to the actual tax year and agreement.