Section 115VR and 115VS: Renewal of Tonnage Tax Scheme and Restriction on Re-entry
Updated for the law applicable on 28 September 2026
Sections 115VR and 115VS formed part of Chapter XII-G of the Income-tax Act, 1961 and dealt respectively with renewal of a tonnage tax option and the ten-year restriction on opting for the scheme after specified defaults, voluntary exit or exclusion. From 1 April 2026, the Income-tax Act, 2025 is the principal law for Tax Year 2026-27 onwards, and the corresponding rules are now substantially consolidated in Section 231.
What was Section 115VR of the Income-tax Act, 1961?
Renewal of tonnage tax scheme
Section 115VR permitted renewal of an approved tonnage tax option within one year from the end of the previous year in which that option ceased to have effect.
It also provided that the provisions governing the method and approval of the option under Section 115VP and the period for which the option remained in force under Section 115VQ applied to a renewal in the same manner as they applied to the original approval.
What was Section 115VS of the Income-tax Act, 1961?
Prohibition to opt for tonnage tax scheme in certain cases
Section 115VS imposed a ten-year bar on a qualifying company opting for the tonnage tax scheme where the company voluntarily opted out, defaulted in complying with specified tonnage tax conditions, or was excluded from the scheme under the statutory exclusion provision.
The ten-year period was counted from the relevant date of opting out, default or exclusion order, as applicable.
Current provision under the Income-tax Act, 2025
For Tax Year 2026-27 onwards, Section 231 is the principal provision dealing with the method of opting for the tonnage tax scheme and the validity of that option. The provisions corresponding to old Sections 115VR and 115VS are contained in Section 231(10), Section 231(11) and Section 231(12).
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Renewal of tonnage tax option | Section 115VR | Section 231(10) and 231(11) |
| Ten-year restriction after opting out, specified default or exclusion | Section 115VS | Section 231(12) |
| Original application and approval mechanism | Section 115VP | Section 231(1) to 231(7) |
| Period and cessation of option | Section 115VQ | Section 231(8) and 231(9) |
Renewal under Section 231(10) and 231(11)
Under Section 231(10), an option for the tonnage tax scheme approved under Section 231(4) may be renewed within one year from the end of the tax year in which the option ceases to have effect.
Section 231(11) applies the provisions of Section 231(1) to 231(9) to renewal in the same manner as they apply to approval of the tonnage tax option. In practical terms, renewal is not merely an informal continuation; it remains tied to the statutory application and approval framework.
Ten-year restriction under Section 231(12)
A qualifying company is not eligible to opt for the tonnage tax scheme for ten years from the relevant date where it:
- opts out of the tonnage tax scheme on its own;
- defaults in complying with the conditions referred to in Section 232(1) to 232(20); or
- is excluded from the tonnage tax scheme pursuant to an order under Section 234(4).
The ten-year period runs from the date of opting out, the date of default, or the date of the exclusion order, as the case may be.
Meaning of important terms
Qualifying company
A qualifying company is a company satisfying the statutory conditions prescribed for eligibility under the tonnage tax provisions. Eligibility is fundamental because only a qualifying company can exercise the option for the tonnage tax scheme.
Tonnage tax scheme
The tonnage tax scheme is a special method for computing profits from the business of operating qualifying ships. Instead of computing the relevant shipping business income solely under the ordinary profit computation provisions, the statutory scheme determines tonnage income in accordance with the special provisions applicable to qualifying shipping operations.
Tonnage tax company
A tonnage tax company is, in substance, a qualifying company for which the tonnage tax option is in force. The company must continue to satisfy the applicable statutory conditions during the period of the option.
Application for renewal: Form 80
Under the Income-tax Rules, 2026, Form 80 is prescribed for an eligible company seeking to exercise or renew the tonnage tax option. The Income Tax Department identifies renewal under Section 231(10). Companies should use the current prescribed form and filing procedure applicable on the date of application.
How the transition from the 1961 Act works
The repeal of the Income-tax Act, 1961 does not erase its operation for earlier periods. Section 536 of the Income-tax Act, 2025 contains savings provisions. Proceedings relating to tax years beginning before 1 April 2026 may continue under the repealed Act as provided by those transitional rules.
Accordingly, a reader dealing with an earlier assessment year, an old tonnage tax approval, a pending proceeding, or another preserved matter may still need Sections 115VR and 115VS. For Tax Year 2026-27 onwards, the current Section 231 framework should be consulted.
Related provisions
For a complete reading of the tonnage tax framework, see the related provisions on opting for the scheme, duration of the option, conditions for continued applicability, amalgamation and demerger, and exclusion for abuse of the scheme.
This article is a general statutory guide. For a transaction, renewal application, default, exclusion proceeding or transitional issue, the applicable Act, Rules, prescribed form, tax year and relevant orders should be checked together.