No TDS on dividend paid between IFSC aircraft leasing units: CBDT Notification No. 141/2026

The Central Board of Direct Taxes (CBDT) has issued Notification No. 141/2026 dated 4 November 2026 (S.O. 6016(E)) under section 400(1) read with Schedule VI of the Income-tax Act, 2025. It provides that no tax is to be deducted under section 393(1) on dividend paid by a Unit of an International Financial Services Centre (IFSC) to another IFSC Unit, where both are primarily engaged in the business of leasing of an aircraft.

Who it affects

IFSC Units engaged in aircraft leasing that pay or receive dividends from other such Units.

Effective date

The notification is deemed to have come into force on 1 April 2026. Its Explanatory Memorandum states that no person is adversely affected by the retrospective effect.

Conditions

• The receiving company (payee) must furnish to the payer a statement-cum-declaration in Form No. 1(N), giving details of the tax year for which the dividend is eligible for exemption.
• Once the payer receives a copy of this declaration, it must not deduct tax on the dividend.
• The payer must report these payments in its TDS statement under section 397(3)(b), read with rule 219 of the Income-tax Rules, 2026.

What businesses should do now

• Payee Units: furnish Form No. 1(N) to the paying Unit so that tax is not deducted.
• Payer Units: keep the declaration on record and report the payments without deduction in the TDS statement.