Chapter XVII - Special Provisions Relating to Certain Persons
Section 316
Section 316: profits of non-residents from occasional shipping business
Section 316 provides a self-contained mechanism for taxing a non-resident-owned or chartered ship that carries passengers, livestock, mail or goods from an Indian port. It deems a fixed 7.5% of the carriage receipts as taxable income, requires the ship's master to file a return before departure, and blocks port clearance until tax is paid or secured - while still letting the owner opt for a full regular assessment later.
On this page
Need advice on Section 316?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Irrespective of anything in the other provisions of this Act, the provisions of this section shall apply for the purpose of levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India.
(2) Where such a ship carries passengers, livestock, mail or goods shipped at a port in India,––
(a) 7.5% of the amount paid or payable on account of such carriage shall be deemed to be income accruing in India to the owner or charterer on account of such carriage, whether that amount is paid or payable in or out of India; and
(b) the amount referred to in clause (a) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.
(3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the person as mentioned in sub-section (2) or any person on his behalf on account of such carriage shipped at that port since the last arrival of the ship thereat.
(4) The requirement of furnishing the return as per sub-section (3) shall be deemed to have been complied with, if––
(a) the Assessing Officer is satisfied that––
(i) it is not possible for the master of the ship to furnish the return before the departure of the ship from the port; and
(ii) the master of the ship has made satisfactory arrangements for filing of the return and payment of tax by any other person on his behalf; and
(b) the return is filed within thirty days of the departure of the ship by any person so authorised by the master.
(5) On receipt of the return, the Assessing Officer shall—
(a) assess the income referred to in sub-section (2); and
(b) determine the sum payable as tax thereon at the rate or rates in force applicable to the total income of a company which has not made the arrangements referred to in section 393(1) (Table: Sl. No. 7) and such sum shall be payable by the master of the ship.
(6) No order assessing the income and determining the sum of tax payable thereon shall be made under sub-section (5) after the expiry of nine months from the end of the tax year in which the return under sub-section (3) is furnished.
(7) For the purposes of determining the tax payable under sub-section (5), the Assessing Officer may call for such accounts or documents as he may require.
(8) A port clearance shall not be granted to the ship until the Commissioner of Customs, or other officer duly authorised to grant the same, is satisfied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for the payment thereof.
(9) Nothing in this section shall prevent the owner or charterer of a ship from claiming, before the end of the year following the tax year in which the date of departure of the ship from Indian port falls, that an assessment be made of his total income of the tax year as per other provisions of this Act, and tax payable be determined on the basis of such assessment.
(10) In a case falling under sub-section (9), any payment made under this section during the tax year, if so claimed, shall be treated as––
(a) tax paid in advance with respect to that year and adjusted against tax payable by such person; and
(b) the difference between the sum so paid and the amount of tax found so payable by him on such assessment shall be paid by him or refunded to him.
Introduction
Section 316 gives a special assessment method for profits of a non-resident from an occasional shipping business involving India. Its default deemed-income base is 7.5% of the specified amounts.
The master of the ship has a pre-departure return role, and port clearance depends on tax payment or satisfactory arrangements unless the statutory alternative assessment route is used.
Key takeaways
Non-resident shipping formula
For qualifying carriage by a non-resident’s ship from an Indian port, 7.5% of the relevant receipts is deemed income under the special rule.
Return before departure
The ship’s master must give the required receipts return before departure; port clearance is tied to tax payment or satisfactory arrangements.
Regular assessment option
The owner or charterer may seek assessment on regular total income within the period specified by the section.
When this special regime applies
Irrespective of the Act's other provisions, Section 316 applies for levying and recovering tax on any ship belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India.
7.5% deemed income
| Item | Detail |
|---|---|
| Deemed taxable income | 7.5% of the amount paid or payable on account of such carriage, whether paid or payable in or out of India |
| What counts toward that amount | Includes demurrage charge, handling charge, or any other amount of a similar nature |
Return by the master of the ship, before departure
Before the ship departs from any Indian port, its master must prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the owner/charterer (or anyone on their behalf) for carriage shipped at that port since the ship's last arrival there.
This requirement is deemed complied with if the Assessing Officer is satisfied it was not possible for the master to file the return before departure and the master made satisfactory arrangements for another authorised person to file the return and pay the tax, and that person files the return within thirty days of the ship's departure.
Assessment and time limit
On receiving the return, the Assessing Officer assesses the deemed income and determines the tax payable at the rate(s) in force applicable to the total income of a company that has not made arrangements under section 393(1) (Table, Sl. No. 7); that sum is payable by the master of the ship.
No assessment order under this section can be made after nine months from the end of the tax year in which the return was furnished. The Assessing Officer may call for accounts or documents needed to determine the tax payable.
Port clearance withheld until tax is secured
Port clearance is not granted to the ship until the Commissioner of Customs, or other duly authorised officer, is satisfied the tax assessable under this section has been paid, or that satisfactory arrangements have been made for its payment.
Option to be assessed on regular total income instead
The owner or charterer can, before the end of the year following the tax year in which the ship departed from the Indian port, claim to be assessed on his total income of that tax year under the Act's other provisions instead, with tax determined on that basis.
If this claim is made, any payment already made under Section 316 during that tax year is treated as advance tax adjusted against the tax payable, and the difference between what was paid and what is finally found payable is paid by him or refunded to him.
Step-by-step flow for taxing a non-resident's occasional shipping business under Section 316
- 1
Does a ship belonging to or chartered by a non-resident carry passengers, livestock, mail or goods shipped at a port in India?
- No: Section 316 does not apply.
- Yes: Go to the next step.
- 2
Work out the deemed income
Under Section 316(2), 7.5% of the amount paid or payable for that carriage, whether paid in or out of India and including demurrage, handling or similar charges, is deemed income accruing in India to the owner or charterer.
- 3
Has the master furnished the return before the ship leaves the port?
Section 316(3) requires a return of the full amount paid or payable for carriage shipped at that port since the ship last arrived there.
- Yes: Go to step 4.
- No: It is treated as complied with only if the Assessing Officer is satisfied that filing before departure is not possible and that satisfactory arrangements are made, and the return is filed within thirty days of departure by an authorised person (Section 316(4)). Go to step 4.
- 4
Assessment and payment
The Assessing Officer assesses the deemed income and determines the tax at the rate or rates in force for a company that has not made the arrangements referred to in Section 393(1) (Table: Sl. No. 7); the master pays it (Section 316(5)). No such order can be made after nine months from the end of the tax year in which the return is furnished (Section 316(6)). Port clearance is not granted until the tax is paid or satisfactorily arranged (Section 316(8)).
- 5
Does the owner or charterer want a regular assessment instead?
Under Section 316(9), a claim can be made before the end of the year following the tax year of departure. The payment under Section 316 is then treated as advance tax, and the difference is paid or refunded (Section 316(10)).
Practical checklist
Do
- Identify freight and other amounts falling within the statutory shipping receipts.
- Prepare the ship master’s return and tax or security arrangement before departure.
Avoid
- Apply the 7.5% deeming rule to every non-resident shipping business without checking whether this special section applies.
Illustrative example
Worked example: freight and demurrage on a voyage from an Indian port
Hypothetical facts (illustration only, not a real taxpayer): A ship chartered by a non-resident company loads goods at an Indian port. Freight paid or payable for that cargo is an assumed ₹2,00,00,000, and demurrage is an assumed ₹10,00,000, part of it paid outside India.
Amount for carriage
Demurrage is included under Section 316(2)(b): ₹2,00,00,000 + ₹10,00,000 = ₹2,10,00,000. Where the amount is paid does not matter.
Deemed income
7.5% × ₹2,10,00,000 = ₹15,75,000 is deemed income accruing in India to the charterer (Section 316(2)(a)).
Return and tax
Before departure the master furnishes the return. The Assessing Officer assesses ₹15,75,000 and determines tax at the company rate in force referred to in Section 316(5). That rate is not stated in Section 316 and is not assumed here.
Departure
Customs grants port clearance only once the tax is paid or satisfactory arrangements are made (Section 316(8)).
Outcome
- Deemed income of ₹15,75,000 is assessed and the tax is payable by the master before clearance.
- The charterer may still claim a regular assessment under Section 316(9), with this payment treated as advance tax.
Frequently asked questions
What percentage of shipping receipts is treated as taxable income under Section 316?
7.5% of the amount paid or payable on account of carriage of passengers, livestock, mail or goods shipped at an Indian port - whether the amount is paid or payable inside or outside India, and including demurrage or handling charges.
Who is responsible for filing the return and paying the tax?
The master of the ship must file the return before departure from the Indian port, and the tax determined under Section 316(5) is payable by the master. If the master cannot file it himself, an authorised person can do so within thirty days of departure, subject to the Assessing Officer's satisfaction under Section 316(4).
Can the ship leave port before the tax is paid?
No - Section 316(8) says port clearance will not be granted until the Commissioner of Customs (or authorised officer) is satisfied the tax has been paid, or satisfactory payment arrangements have been made.
Can the non-resident owner ask for a full regular assessment instead of the 7.5% deemed-income route?
Yes - Section 316(9) allows the owner or charterer to claim, within a set time limit, to be assessed on his actual total income for the tax year under the Act's general provisions, with amounts already paid under Section 316 treated as advance tax and any excess refunded.
Need help applying this provision to your situation?
Get help with non-resident shipping business taxationLast updated 9 October 2026