Section 230
Section 230: exclusion of deduction, loss, set off, etc
Because tonnage income under Section 227 is a notional figure based purely on ship tonnage, Section 230 stops a tonnage tax company from also claiming ordinary business deductions, carrying forward business losses, or claiming Chapter VIII deductions against that income - while making special provision for losses that existed before the company entered the scheme.
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.
What is excluded while the tonnage tax scheme applies
In computing tonnage income for any tax year in which the tonnage tax scheme applies, irrespective of any other Act provision:
- Sections 28 to 52 apply as if every loss, allowance or deduction relating to, or allowable for, any relevant tax year had already been given full effect for that year itself
- No loss referred to in Section 108(1)/(2)(b), 109(1), 112(1) or 116(1), to the extent it relates to the business of operating qualifying ships, can be carried forward or set off for tax years when the company is under the scheme
- No deduction is allowed under Chapter VIII in relation to profits and gains from operating qualifying ships
- In computing depreciation allowance under Section 33, the written down value of an asset used for the tonnage tax business is computed as if the company had actually claimed and been allowed depreciation for the relevant tax years
Losses that existed before opting in
Section 112 applies to losses that accrued to the company before it opted for the tonnage tax scheme and that relate to its tonnage tax business, as if those losses had been set off against relevant shipping income in the tax years the company is under the scheme.
Such pre-option losses cannot be set off against any income other than relevant shipping income, for tax years beginning on or after the company exercises its option under Section 231.
Any apportionment needed to determine these losses must be made on a reasonable basis.
Frequently asked questions
Can a tonnage tax company claim depreciation or Chapter VIII deductions against its tonnage income?
No. Section 230(1)(c) and (d) exclude Chapter VIII deductions and treat depreciation as if already fully allowed, so it cannot be separately claimed against tonnage income.
What happens to a shipping loss the company had before joining the scheme?
It is treated as set off against relevant shipping income during the years the company is under the scheme, but it cannot be used against any other kind of income once the option under Section 231 has been exercised.
Related sections
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