The Central Board of Direct Taxes (CBDT), Ministry of Finance, has issued Notification No. 141/2026 [F. No. 275/17/2026-IT(B)], dated November 4, 2026, vide S.O. 6016(E), providing exemption from Tax Deduction at Source (TDS) on specified dividend payments between eligible aircraft leasing units located in International Financial Services Centres (IFSCs), subject to prescribed conditions under the Income-tax Act, 2025.
The notification has been issued in exercise of the powers conferred under Section 400(1), read with Schedule VI [Table: S. No. 11] of the Income-tax Act, 2025. It provides that no tax shall be deducted under Section 393(1) [Table: S. No. 7] on dividend income paid by an IFSC unit primarily engaged in aircraft leasing to a company that is also an IFSC unit primarily engaged in aircraft leasing.
To avail the TDS exemption, the recipient company (payee) is required to furnish a Statement-cum-Declaration in Form No. 1(N) to the payer, specifying the relevant tax year in which the dividend income is eligible for exemption under Schedule VI [Table: S. No. 11] of the Income-tax Act, 2025.
Upon receipt of the prescribed declaration, the payer shall not deduct TDS on dividend payments made or credited to the eligible recipient after the date of receipt of such declaration. However, the payer must report the particulars of all such payments on which tax has not been deducted in the prescribed TDS statement under Section 397(3)(b) of the Income-tax Act, 2025, read with Rule 219 of the Income-tax Rules, 2026.
The newly prescribed Form No. 1(N) requires details including the name, PAN, IFSC unit particulars, address, contact information and relevant tax year. The recipient must also declare that its unit continues to operate in an IFSC, remains engaged in aircraft leasing activities and that the dividend income qualifies for the specified exemption. The declaration must be verified by a person competent to sign the return of income under Section 265 of the Income-tax Act, 2025.
Further, the Principal Director General or Director General of Income-tax (Systems), as applicable, has been authorised to prescribe procedures, formats and standards for secure data capture, document uploads, transmission, archival and retrieval.
Importantly, the notification shall be deemed to have come into force retrospectively from April 1, 2026. The accompanying Explanatory Memorandum clarifies that no person is adversely affected by granting retrospective effect to the notification.
The notification provides a specific TDS compliance exemption for qualifying dividend payments within the IFSC aircraft leasing sector, facilitating eligible inter-unit dividend distributions while maintaining prescribed declaration and reporting requirements.
The Notification can be accessed at: https://www.incometaxindia.gov.in/documents/d/guest/notification-no-141-2026-pdf
