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Section 231 Income Tax Act 2025: How to Opt for the Tonnage Tax Scheme?

Section 231 prescribes how a qualifying shipping company may elect the tonnage tax scheme, the time for filing an application, the approval procedure, the duration of the option and its renewal or cessation.

Current legal position: This guide addresses Section 231 of the Income-tax Act, 2025, read with the Income-tax Rules, 2026. Check the current statutory text and applicable rules before making a filing.

What does Section 231 of the Income-tax Act, 2025 provide?

Section 231, titled Method of opting of tonnage tax scheme and validity, regulates a company's election to compute eligible shipping profits under the tonnage tax provisions. The scheme does not apply merely because a company operates ships: Section 226(5) requires an option made in accordance with Section 231.

Instead of computing eligible shipping business profits under the ordinary provisions, an approved tonnage tax company computes its tonnage income under the statutory scheme, including Section 227. The election is subject to eligibility, approval and continuing compliance.

How does a company apply for the tonnage tax scheme?

Section 231(1): Application to the Joint Commissioner

A qualifying company may apply to the Joint Commissioner having jurisdiction over it in the prescribed form and manner. Form No. 80, prescribed under Rule 146 of the Income-tax Rules, 2026, is the application for exercising or renewing the option.

Section 231(2): Three-month application window

The application may be made within three months from the date of incorporation or the date on which the company first becomes a qualifying company, as applicable. The applicable trigger date should be documented carefully.

Section 231(3): Special rule for an IFSC unit

A unit of an International Financial Services Centre that has availed a deduction under Section 147 may apply within three months from the date that deduction ceases.

Section 231(4) and (5): Examination and hearing

The Joint Commissioner may seek information or documents to verify eligibility and must issue a written order approving or refusing the option. An adverse order cannot be made without giving the applicant a reasonable opportunity of being heard.

Section 231(6): Time limit for the order

The order must be passed before expiry of three months from the end of the quarter in which the application is received. This is a statutory time limit for the authority's order, not the applicant's filing deadline.

Section 231(7): Effective tax year

Where approval is granted, the tonnage tax provisions apply from the tax year in which the company exercises its option.

How long does the tonnage tax option remain valid?

Section 231(8): Ten-year validity

An approved option remains in force for ten years from the date it is exercised, subject to the provisions governing its earlier cessation. It is taken into account from the tax year in which the option is exercised.

Section 231(9) to (12): Cessation, renewal and restrictions

The remaining provisions address when an option ceases to operate, renewal of an option and restrictions on making a further option in specified circumstances. A company should review the precise statutory conditions before withdrawing, renewing or seeking to re-enter the scheme.

For renewal, the Income Tax Department identifies Form No. 80 under Section 231(10). Companies should confirm the relevant renewal deadline and conditions under the current Act and Rules before submission.

Practical compliance point: Approval under Section 231 does not dispense with ongoing obligations under other tonnage tax provisions, including the requirements concerning the tonnage tax reserve, training, chartering limits and maintenance and audit of accounts.

Relevant statutory definitions and expressions

Qualifying company: A company satisfying the statutory eligibility conditions for the tonnage tax regime. Eligibility must be evaluated with the definitions and requirements in the relevant tonnage tax provisions, including Section 235.

Tonnage tax company: A qualifying company whose option for the tonnage tax scheme is effective under the Act.

Tonnage tax scheme: The special statutory mechanism for determining taxable income from eligible shipping operations on a tonnage basis rather than by ordinary accounting profits.

Qualifying ship: A vessel meeting the statutory conditions for the scheme; ownership or operation alone does not establish eligibility.

Joint Commissioner: The income-tax authority having jurisdiction over the applicant company and empowered under Section 231 to decide its application.

International Financial Services Centre (IFSC): The specified financial services centre relevant to the special application window under Section 231(3).

Practical example: When must an application be made?

Assume an Indian shipping company first becomes a qualifying company on 1 July 2026. Section 231(2) provides a three-month period measured from that qualifying date. The company should submit the prescribed application within the statutory window and retain proof of filing. If the application is received during the July-September 2026 quarter, Section 231(6) requires the Joint Commissioner to pass the order before the expiry of three months from the end of that quarter, subject to the applicable statutory framework.

This example illustrates the different time limits for applying and for deciding an application; it does not establish eligibility or guarantee approval.

Corresponding provisions under the Income-tax Act, 1961

Section 231 brings together the subject matter of former Sections 115VP, 115VQ, 115VR and 115VS, covering the method and time of opting, duration, renewal and prohibition on opting in specified cases. Earlier Form No. 65 corresponds to Form No. 80 under the Income-tax Rules, 2026.

Frequently asked questions

Is the tonnage tax scheme automatic for shipping companies?

No. An eligible company must exercise an option in the prescribed manner and obtain the required approval.

Which form is used for an initial application or renewal?

Form No. 80 under the Income-tax Rules, 2026 is prescribed for exercising or renewing the option under Section 231.

How long does an approved option last?

Ordinarily, ten years from the date of exercise, subject to the statutory cessation provisions.

Can the Joint Commissioner reject the application without a hearing?

No. Section 231(5) requires a reasonable opportunity of being heard before a refusal order is passed.

Does an IFSC unit have a different application trigger?

Yes. Section 231(3) provides a special three-month window after cessation of the relevant Section 147 deduction.

Official legal sources

Income-tax Act 2025 - amended text Official Form 80 guidance Official Form 80 FAQs

Last reviewed: 11 November 2026. This article provides general statutory information; application to individual facts requires review of the current law and supporting records.