Tax administration waives withholding tax on aircraft leasing dividends in IFSC zones via Form 1(N)

The Central Board of Direct Taxes (CBDT) has issued Notification 141/2026, granting an exemption from Tax Deduction at Source (TDS) on dividend payments made by eligible aircraft leasing companies operating within the International Financial Services Centre (IFSC), subject to the mandatory furnishing of Form 1(N), effective April 1, 2026. This notification provides targeted relief to aviation financiers and lessors established in designated financial zones.

Withholding tax exemptions on dividend distributions remove cash flow blockages for specialized capital-intensive sectors like aviation leasing, encouraging foreign direct investment and domestic asset holding within special economic zones. Compliance with such exemptions requires adherence to strict procedural safeguards, including the timely filing of specific declarations and statutory forms before dividend payouts are processed.

Tax practitioners and corporate finance teams must verify that client entities satisfy all eligibility criteria and prepare internal systems to file Form 1(N) prior to the April 1, 2026 effective date. Monitor administrative circulars for procedural clarifications. Bottom line: implement Form 1(N) filing protocols for IFSC aircraft leasing clients to secure TDS-free dividend distributions.