Section 316 Income Tax Act 2025: How Is Non-Resident Shipping Income Taxed?
Section 316 sets out a special mechanism for levy and recovery of income tax where a ship belonging to, or chartered by, a non-resident carries passengers, livestock, mail or goods shipped at an Indian port. The section is particularly important for occasional voyages and tax clearance before departure.
When does Section 316 apply?
Under Section 316(1), the special levy-and-recovery procedure applies to a ship owned or chartered by a non-resident when it carries passengers, livestock, mail or goods shipped at a port in India. The provision overrides other provisions to the extent stated in the section and focuses on the Indian-port carriage receipts of the voyage.
How is income computed under Section 316(2)?
Section 316(2)(a) deems 7.5% of the amount paid or payable for qualifying carriage to be income accruing in India to the non-resident owner or charterer, whether the payment is made in India or abroad. Section 316(2)(b) includes demurrage charges, handling charges and amounts of a similar nature in the relevant receipts.
Return, assessment and departure procedure
Section 316(3): Return before the ship leaves
Before the ship departs from an Indian port, its master must prepare and furnish to the Assessing Officer a return stating the full amount paid or payable for the qualifying carriage shipped at that port since the ship's last arrival there.
Section 316(4): Alternative filing within 30 days
The Assessing Officer may accept an alternative arrangement where filing before departure is not possible, satisfactory arrangements have been made for another person to file the return and pay the tax, and the authorised person files the return within 30 days after departure. The statutory conditions must be met; the 30-day period is not an unconditional extension.
Section 316(5): Assessment and payment
On receiving the return, the Assessing Officer assesses the income and determines the tax payable in accordance with Section 316. The section provides a special recovery process tied to the voyage.
Section 316(6): Clearance before departure
The ship's departure clearance is linked to payment of the tax assessed or satisfactory arrangements for its payment, as required by the statutory procedure. Shipmasters and local agents should coordinate return filing, tax computation and clearance documentation in advance.
Section 316(7) and related provisions: Regular assessment
The provision also permits an eligible non-resident owner or charterer to seek assessment of total income under the applicable regular assessment provisions, within the statutory time and conditions. Tax paid through the voyage-based process is taken into account as provided by law. The election and applicable filing deadline should be verified against the operative statutory text.
Relevant statutory terms and concepts
Practical example of shipping income tax
A non-resident shipowner carries goods loaded at an Indian port. Assume freight receipts of Rs. 80,00,000, demurrage of Rs. 8,00,000 and handling charges of Rs. 2,00,000 relating to the qualifying carriage.
| Particulars | Amount |
|---|---|
| Freight | Rs. 80,00,000 |
| Demurrage | Rs. 8,00,000 |
| Handling charges | Rs. 2,00,000 |
| Total qualifying receipts | Rs. 90,00,000 |
| Deemed income at 7.5% | Rs. 6,75,000 |
The Rs. 6,75,000 is deemed income, not the final tax payable. The actual tax depends on the applicable tax rate and other legally available reliefs.
How does Section 316 differ from general shipping presumptive taxation?
Section 316 is a special voyage-linked levy and recovery provision for qualifying non-resident shipping activity involving cargo or passengers shipped at an Indian port. General presumptive computation for specified non-resident shipping businesses is dealt with separately under the applicable provisions, including Section 61 of the 2025 Act. The two mechanisms should not be treated as interchangeable without examining their conditions.
Frequently asked questions
Is 7.5% the tax rate on non-resident shipping?
No. It is the percentage of qualifying receipts deemed to be income. Tax is calculated on that income at the applicable rate.
Are freight payments received outside India included?
Yes. For carriage covered by Section 316(2), the payment location does not remove the amount from the statutory computation.
Are demurrage charges included?
Yes. Section 316(2)(b) expressly includes demurrage, handling and similar charges.
Must the master file a return before departure?
Ordinarily, yes. Section 316(4) provides a conditional alternative allowing an authorised person to file within 30 days after departure if the Assessing Officer is satisfied about the statutory arrangements.
Which provision applied before the Income-tax Act, 2025?
Section 172 of the Income-tax Act, 1961 is the corresponding earlier provision. Earlier-year proceedings may remain governed by the former Act under the transition rules.
Official law and related resources
Updated: 11 November 2026. This article provides general legal information. Apply the enacted text, relevant rules and applicable treaty provisions to the facts of each voyage.