Section 316 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 316 sets a simple scheme for a ship that belongs to, or is chartered by, a non-resident and carries passengers, livestock, mail or goods shipped at an Indian port. A fixed share of what is paid for the carriage is deemed to be income accruing in India, the ship's master furnishes a return before departure, and the tax is assessed on that return and paid by the master. This article reads the section as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
For a ship belonging to or chartered by a non-resident that carries passengers, livestock, mail or goods shipped at an Indian port, 7.5 per cent of the amount paid or payable for the carriage is deemed income accruing in India, including demurrage and handling charges. The master must furnish a return before departure, tax is assessed at the rates in force for a company, and port clearance is withheld until the tax is paid or arranged.
Sub-section (1): where the section applies
Irrespective of anything in the other provisions of the Act, section 316 applies for the levy and recovery of tax in the case of any ship belonging to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India.
The section is a special code. It operates "irrespective of anything in the other provisions", so the ordinary computation of business income does not apply to the carriage that falls within it, unless the owner or charterer chooses the alternative route in sub-section (9). Non-resident owners and charterers who ship from India can get help with the Indian side from our NRI tax filing team.
Sub-section (2): the deemed income
Where such a ship carries passengers, livestock, mail or goods shipped at a port in India:
| Clause | Rule |
|---|---|
| (a) | 7.5 per cent of the amount paid or payable on account of the carriage is deemed to be income accruing in India to the owner or charterer on account of the carriage, whether that amount is paid or payable in or out of India |
| (b) | The amount in clause (a) includes the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature |
The 7.5 per cent is the figure printed in the section. The percentage applies to what is paid or payable for carriage of items shipped at an Indian port, wherever the payment is made.
Sub-sections (3) and (4): the master's return
- (3) Before the departure from any port in India of any such ship, the master of the ship prepares and furnishes to the Assessing Officer a return of the full amount paid or payable to the person mentioned in sub-section (2), or any person on his behalf, on account of such carriage shipped at that port since the last arrival of the ship there.
- (4) The requirement in sub-section (3) is deemed complied with if (a) the Assessing Officer is satisfied that (i) it is not possible for the master to furnish the return before departure, and (ii) the master has made satisfactory arrangements for filing the return and payment of tax by another person on his behalf; and (b) the return is filed within thirty days of the departure of the ship by a person so authorised by the master.
Both conditions in sub-section (4)(a) and the thirty-day filing in (b) must be met. The form and verification of the return are not printed in this section.
Sub-sections (5) to (7): assessment
- (5) On receipt of the return, the Assessing Officer (a) assesses the income referred to in sub-section (2); and (b) determines the sum payable as tax on it at the rate or rates in force applicable to the total income of a company which has not made the arrangements referred to in section 393(1) (Table: serial number 7); the sum is payable by the master of the ship. The Act prints no rate in this sub-section; the rate is the rate in force.
- (6) No order assessing the income and determining the tax under sub-section (5) is made after nine months from the end of the tax year in which the return under sub-section (3) is furnished.
- (7) To determine the tax payable under sub-section (5), the Assessing Officer may call for such accounts or documents as he requires.
For tax deducted at source under section 393, see our overview of section 393.
Sub-section (8): port clearance
A port clearance is not granted to the ship until the Commissioner of Customs, or other officer duly authorised to grant it, is satisfied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for its payment. This is the practical lever that makes the scheme work: a ship that has not dealt with the tax cannot leave.
Sub-sections (9) and (10): the alternative route
| Sub-section | Rule |
|---|---|
| (9) | Nothing in the section prevents the owner or charterer from claiming, before the end of the year following the tax year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the tax year as per the other provisions of the Act, and the tax payable determined on that assessment |
| (10) | In a case under sub-section (9), any payment made under this section during the tax year, if so claimed, is treated as (a) tax paid in advance for that year and adjusted against the tax payable; and (b) the difference between the sum so paid and the tax found payable on the assessment is paid by him or refunded to him |
So the owner or charterer is not locked into the 7.5 per cent method. It can claim a regular assessment of its total income for the tax year, and the payment made at the port is credited.
Who is affected
| Person | Effect |
|---|---|
| Non-resident ship owner or charterer | The 7.5 per cent of carriage charges is its deemed Indian income; it may claim a regular assessment under sub-section (9) |
| Master of the ship | Furnishes the return before departure (or arranges for it under sub-section (4)) and pays the tax |
| Assessing Officer | Assesses on the return, within nine months from the end of the tax year of the return, and may call for accounts |
| Customs officer | Grants port clearance only when the tax is paid or satisfactorily arranged |
A worked example
The ship, parties and amounts are assumed, and the percentage is the one printed in the section. The rate of tax is not printed here, so the example stops at the deemed income.
The vessel MV Lakshmi Star, chartered by a non-resident company, loads goods at an Indian port. The amount paid and payable for carriage since the ship's last arrival is Rs. 40,00,000, including Rs. 2,00,000 of demurrage and handling charges (sub-section (2)(b)).
- Deemed income: 7.5 per cent of Rs. 40,00,000 = Rs. 3,00,000. This is deemed to be income accruing in India to the charterer, whether the Rs. 40,00,000 is paid in India or abroad.
- Return: before the ship leaves the port, the master furnishes a return of the full Rs. 40,00,000 to the Assessing Officer. If it cannot be done before departure, and the Assessing Officer is satisfied about the arrangements, the return can be filed by an authorised person within thirty days of departure.
- Assessment: the Assessing Officer assesses the Rs. 3,00,000 and determines tax at the rate or rates in force applicable to a company's total income as described in sub-section (5)(b); the master pays it.
- Port clearance: the Commissioner of Customs (or authorised officer) gives clearance only on being satisfied that the tax is paid or arranged.
- Time limit: if the return is furnished in a tax year, the assessment order cannot be made after nine months from the end of that tax year.
- Alternative: before the end of the year following the tax year of departure, the charterer may claim a regular assessment on its total income. The tax paid under section 316 is then treated as advance tax and any difference is paid or refunded.
Need help with Indian income of a non-resident?
Where a non-resident has Indian-source freight income, the deemed-income method is only one of the routes the Act offers. If you act for a non-resident owner, charterer or ship's agent, our team can help you compare the routes and prepare the return. See our NRI tax filing service.
Key takeaways
- Section 316 applies to a ship belonging to or chartered by a non-resident that carries passengers, livestock, mail or goods shipped at an Indian port.
- 7.5 per cent of the amount paid or payable for carriage, including demurrage and handling charges, is deemed income accruing in India.
- The master furnishes a return before departure; if not possible, an authorised person may file within thirty days of departure on the conditions in sub-section (4).
- Tax is at the rate or rates in force for a company, as sub-section (5)(b) describes, payable by the master.
- Port clearance is not granted until the tax is paid or satisfactory arrangements are made.
- The owner or charterer may instead claim a regular assessment before the end of the year following the tax year of departure.
Read next
- Sections 317 to 319: persons leaving India, event-based bodies and transfers to avoid tax
- Sections 303 to 306: representative assessees and agents of non-residents
- Section 393: tax deducted at source
- Chapter XVII: special provisions relating to certain persons
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.