Union Budget 2021 | Tax sops for aircraft leasing in India

Finance Minister Nirmala Sitharaman announced tax sops for aircraft leasing in India, a move welcomed by the industry, which has to pay in dollars to rent aircraft from foreign leasing companies.

The Minister said there would be tax holiday for capital gains of aircraft leasing companies that set up an arm in GIFT City, Ahmedabad, as well as tax exemption for aircraft lease rentals paid to foreign lessors who set up shop in India.

The other important push in the Budget for the aviation sector is privatisation of airports. Ms. Sitharaman said the second batch of airports would be monetised. The government had handed over six airports to Adani Enterprises Limited in the first round of privatisation. The second round that awaited the Cabinet nod included Amritsar, Varanasi, Bhubaneshwar, Indore, Raipur and Tiruchi.

The government also planned to privatise smaller airports in tier-2 and tier-3 cities under its asset monetisation programme.

Departure from past

This is a departure from the past where the government has maintained that big airports were being privatised so that it could generate cash to invest in airports in smaller cities.

“The tax incentives for aircraft leasing companies augurs well for developing an ecosystem for leasing in India. It will also help in preserving foreign exchange and containing it within the country,” Jagannarayan Padmanabhan, Director and Practice Lead for Transport and Logistics, Crisil Infrastructure Advisory, told The Hindu.

The Budget for the Ministry of Civil Aviation received ₹3,224 crore- a 22% reduction in allocation for financial year 2022 as compared to the current fiscal. Air India, which awaits disinvestment, saw zero allocation.