Section 227
Section 227: computation of tonnage income
Section 227 lays down the mechanical formula for computing tonnage income - a notional measure of business income for a company that has opted into the tonnage tax scheme, based on each qualifying ship's net tonnage rather than its actual profit.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
The formula
A tonnage tax company's tonnage income for a tax year is the aggregate of the tonnage income of each qualifying ship, computed as TI = DTI x N, where TI is the tonnage income of the ship, DTI is its daily tonnage income, and N is the number of days in the tax year (or part of the year) that the ship was operated by the company as a qualifying ship.
Daily tonnage income slabs
The daily tonnage income (DTI) of a qualifying ship depends on its net tonnage, per the following table:
| Net tonnage of the qualifying ship | Daily tonnage income |
|---|---|
| Up to 1,000 | ₹70 for each 100 tons |
| Exceeding 1,000 but not more than 10,000 | ₹700 plus ₹53 for each 100 tons exceeding 1,000 tons |
| Exceeding 10,000 but not more than 25,000 | ₹5,470 plus ₹42 for each 100 tons exceeding 10,000 tons |
| Exceeding 25,000 | ₹11,770 plus ₹29 for each 100 tons exceeding 25,000 tons |
Tonnage and rounding rules
Tonnage means the tonnage of a ship or inland vessel indicated in its valid certificate, and includes "deemed tonnage" attributable to arrangements like slot purchase, slot charter and break-bulk vessel sharing, computed in the prescribed manner.
Tonnage is rounded to the nearest multiple of 100 tons - kilograms are ignored, and if the last figure is 50 tons or more it is rounded up, and if less than 50 tons it is rounded down.
No deduction or set-off is allowed while computing tonnage income under this Part, irrespective of any other provision of the Act.
Ships operated jointly by two or more companies
Where a qualifying ship is operated by two or more companies through joint interest in the ship or under a usage agreement, and their respective shares are definite and ascertainable, each company's tonnage income is its proportionate share. If shares are not so ascertainable, each company's tonnage income is computed as if it were the only operator.
What counts as a "valid certificate"
The tonnage figure is taken from a valid certificate: for ships registered in India, this is a Merchant Shipping (Tonnage Measurement of Ship) Rules certificate or, for vessels 24 metres or longer, an international tonnage certificate; for ships registered outside India, a licence issued by the Director-General of Shipping specifying net tonnage; and for inland vessels registered in India, a certificate of registration under the Inland Vessels Act, 2021.
Frequently asked questions
Can a tonnage tax company claim normal business deductions against tonnage income?
No - Section 227(6) expressly bars any deduction or set-off in computing tonnage income under this Part, irrespective of any other provision of the Act.
Is tonnage income based on actual freight earnings?
No. It is a notional figure computed purely from each qualifying ship's net tonnage and the number of days it was operated, using the slab rates in Section 227(3) - it does not depend on the ship's actual revenue or profit.
Related sections
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Talk to our tax team about tonnage income computationLast updated 9 September 2026