Finmin may scrap withholding tax on aircraft leases

New Delhi: The government is all set to scrap the present system of granting case-by-case exemption to airlines from paying withholding tax on aircraft leases. Finance minister P Chidambaram is expected to scrap the tax on aircraft leases altogether in the forthcoming Budget.
Withholding tax was a major expense for the carriers as it varies between 10% and 48% a year depending on the country where the airplane is leased.
Indian carriers are expected to acquire about 450 aircraft in the next five years and a large number of these will come as leased airplanes. Domestic aviation sector expect that if withholding tax continues, Indian carriers are expected pay over Rs 1,000 crore a year as tax. This is a significant part of the cost and profits of the aviation industry, which is likely to incur losses of Rs 2,000 crore this fiscal.
Assuming that the tax is paid by an airline company, the average monthly lease rent of an Airbus A320-type aircraft is about 1% of the price value, which turns out to be about Rs 20 crore a year.
12/02/08 Shauvik Ghosh/Financial Express

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Categories: Indian Aviation- In General Feb 2008