Section 115VB and 115VC: Operating Ships and Qualifying Company
Sections 115VB and 115VC of the Income-tax Act, 1961 explained two basic requirements of India's tonnage tax scheme: when a company is treated as operating a ship and when it is a qualifying company. From 1 April 2026, the Income-tax Act, 2025 is the current statute, with these concepts reorganised under the new section numbering.
Updated: 28 September 2026
What did Section 115VB mean by operating ships?
Under former Section 115VB, a company was regarded as operating a ship when it operated a ship owned or chartered by it. The rule also covered arrangements in which only part of a ship was chartered in, such as a slot charter, space charter or joint charter.
A company was not treated as the operator of a ship that it had chartered out on bareboat charter-cum-demise terms, or on bareboat charter terms for a period exceeding three years.
Practical meaning
The provision focused on the company's role as an operator, rather than requiring outright ownership in every case. A qualifying shipping business could therefore involve owned ships, chartered ships and specified part-ship charter arrangements, subject to the exclusions and other conditions of the tonnage tax scheme.
What did Section 115VC mean by a qualifying company?
Former Section 115VC required all of the following conditions to be satisfied for a company to be a qualifying company:
- it was an Indian company;
- its place of effective management was in India;
- it owned at least one qualifying ship; and
- its main object was to carry on the business of operating ships.
Place of effective management for Section 115VC
For this specific provision, the place of effective management meant the place where the board of directors or executive directors made their decisions. Where the board routinely approved commercial and strategic decisions already made by executive directors or officers, the relevant place was where those executive directors or officers performed their functions.
Position under the Income-tax Act, 2025
The new Act reorganises the tonnage tax scheme instead of simply retaining the old section numbers. Section 226(1) deals with when a company is regarded as operating a ship or inland vessel. It continues to recognise ownership, chartering and arrangements such as slot charter, space charter and joint charter, while excluding specified ships or inland vessels chartered out on bareboat terms for more than three years.
The new framework also extends the tonnage tax scheme to qualifying inland vessels. The qualifying-company concept remains part of the statutory definitions for the scheme. Readers dealing with Tax Year 2026-27 onwards should therefore use the Income-tax Act, 2025 section numbering, while older assessment years may still require reference to Sections 115VB and 115VC of the 1961 Act.
Why these definitions matter
The tonnage tax scheme is a special method for computing income from the business of operating qualifying ships. Whether the company is an operator and whether it satisfies the qualifying-company conditions are threshold issues. Other provisions determine matters such as what constitutes a qualifying ship, computation of tonnage income, the option for the scheme and continuing compliance requirements.
Related provisions
For the surrounding provisions of the older Act, see the pages on Section 115V definitions and relevant shipping income, Sections 115V-O and 115VA, Sections 115VD and 115VE, and Sections 115VF and 115VG.
Official references
For current statutory text and transition material, consult the official Income Tax Department resources: