Section 231
Section 231: opting for the tonnage tax scheme, and its validity
Section 231 sets out the procedure a qualifying company must follow to opt into the tonnage tax scheme, how long the option remains in force once approved, the events that end it, and the conditions for renewal or re-application.
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.
Making the application
A qualifying company may opt for the tonnage tax scheme by applying to the Joint Commissioner having jurisdiction over it, in the prescribed form and manner.
The application must be made within three months of the company's incorporation, or of the date it first becomes a qualifying company - whichever is relevant.
A Unit of an International Financial Services Centre that has availed of the deduction under Section 147 may apply within three months from the date that deduction ceases.
Approval process
On receiving the application, the Joint Commissioner may call for information or documents needed to satisfy himself of the company's eligibility, and must then pass a written order either approving or refusing the option - refusal cannot be ordered without giving the applicant a reasonable opportunity of being heard. A copy of the order is sent to the applicant.
The order must be passed before the expiry of three months from the end of the quarter in which the application was received.
Validity period
Where approval is granted, the tonnage tax scheme applies from the tax year in which the option is exercised, and remains in force for ten years from the date the option was exercised.
When the option ceases to have effect
The option for the tonnage tax scheme ceases to have effect from the tax year in which:
- The qualifying company ceases to be a qualifying company
- A default is made in complying with the conditions in Section 232(1) to (20)
- The company is excluded from the scheme under Section 234 (anti-avoidance exclusion)
- The company furnishes a written declaration to the Assessing Officer that the scheme should no longer apply to it - after which its shipping income is computed under the Act's other provisions
Renewal and the bar on re-opting
An approved option may be renewed within one year from the end of the tax year in which it ceased to have effect, and the rules governing the original application and approval apply equally to a renewal.
A qualifying company that voluntarily opts out, defaults under Section 232, or is excluded by an order under Section 234(4), is barred from opting for the tonnage tax scheme again for ten years from the date of opting out, the default, or the order.
Frequently asked questions
Who approves a company's application to join the tonnage tax scheme?
The Joint Commissioner having jurisdiction over the company, who must pass a written order approving or refusing the option after giving the company a hearing if refusing.
How long does an approved option stay valid?
Ten years from the date the option was exercised, unless it ends earlier due to the company ceasing to be a qualifying company, defaulting on scheme conditions, being excluded for tax avoidance, or voluntarily opting out.
Can a company re-apply immediately after opting out or being excluded?
No - Section 231(12) bars re-application for ten years from the date of voluntarily opting out, defaulting, or being excluded by order.
Related sections
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Talk to our tax team about opting into the tonnage tax schemeLast updated 9 September 2026