Section 115VG of ITA, 1961 : Section 115Vg: Computation Of Tonnage Income

Explanation using Example

Imagine a shipping company, Oceanic Transports Pvt. Ltd., which operates a fleet of ships and has opted for the tonnage tax scheme under the Income-tax Act, 1961. One of their ships, the MV Bluewave, has a net tonnage of 9,000 tons and has been operated as a qualifying ship for the entire previous year.

According to Section 115VG, to calculate the tonnage income for MV Bluewave, Oceanic Transports would refer to the table provided in the Act. Since the ship's tonnage exceeds 1,000 but does not exceed 10,000, the company would calculate the daily tonnage income as follows:

Daily Tonnage Income Calculation:

Base amount for the first 1,000 tons: Rs. 700

Additional amount for the remaining 8,000 tons: 8,000/100 * Rs. 53 = Rs. 4,240

Total daily tonnage income: Rs. 700 + Rs. 4,240 = Rs. 4,940

Since the ship was operated for the entire year, the number of days would be 365. Therefore, the annual tonnage income for MV Bluewave would be:

Annual Tonnage Income = Daily Tonnage Income * Number of Days

Annual Tonnage Income = Rs. 4,940 * 365 = Rs. 1,803,100

The tonnage income for MV Bluewave for the year would thus be Rs. 1,803,100. This amount is the aggregate income from the ship that the company would declare, and no deductions or set offs are allowed against this income under the tonnage tax scheme.