Section 44BBC: Tax on Non-Resident Cruise Ship Operators(FY 2025–26)

Section 44BBC deals with a presumptive taxation scheme for non-resident cruise shipping companies, subject to certain conditions. This section was introduced in the 2025 budget, in which 20% of gross receipts is treated as profit and tax is calculated on that basis. 

What is Section 44BBC?

Section 44BBC deals with presumptive taxation for non-residents operating a cruise shipping business involved in the transportation of passengers. If the cruise ship touches two Indian ports, or any Indian port twice, and on satisfaction of other conditions, you can opt for presumptive taxation under section 44BBC.

20% of the amount due to the assessee on account of passenger transport is deemed as profit, with no other allowances or deductions applicable. No depreciation or losses can be carried forward.

Who does Section 44BBC apply to?

Non- Resident

Irrespective of being a foreign company or not, non-residents are eligible to claim presumptive taxation benefit under section 44BBC.

Cruise ships Operations

• Cruise ships are recreational tourist ships, often luxurious in nature, generating revenue through various streams, such as ticket prices, the sale of alcohol and food on board, gambling, conferences, wedding bookings and so on. 
• Section 44BBC applies only to those non-resident assessees engaged in the aforesaid shipping business. 
• Cargo ships, charter ships, and support ships for oil and gas activity are not covered under this section. 

Conditions to Qualify (Rule 6GB)

Section 44BBC applies subject to conditions as prescribed under Rule 6GB of the Income Tax Rules. The following conditions need to be satisfied under Rule 6GB to opt for presumptive taxation under Section 44BBC:

• Cruise ship eligibility - The ship should have a capacity of at least 200 passengers, or the length of the ship is at least 75 meters. In addition to the above, appropriate cabin and dining facilities are essential to qualify as a cruise ship.
• Compliance with ministry guidelines: The Ministry of Tourism and Shipping has laid down policies and guidelines that must be strictly complied with to qualify for presumptive under section 44BBC.
•  Voyage/route conditions - The voyage or shore excursion must be scheduled in such a manner that it touches at least two Indian ports, or any Indian port twice.
• Passenger-first condition: The ship should be used to carry passengers. Cargo ships are not eligible for the section 44BBC presumptive scheme.

How is Income Computed under Section 44BBC?

Deemed Profit Rate

Under section 44BBC, profit earned in the business during the financial year is taken as a flat 20% of the specified amount.

Specified Amount

• The meaning of the specified amount is provided under sub-section 2 of section 44BBC.
• Any amount received or due to the assessee on account of carrying passengers in a cruise ship qualifies to e specified amount. 
• Therefore, income from dining, alcohol, recreational activities, shore excursions, and all other income except the ticket income should be excluded from the specified amount.

Section 44BBC  -An Illustration

Joy Cruisers Inc., a US-based non-resident company, is engaged in operating recreational cruise voyages. During the previous year, it operated a scheduled cruise with the following itinerary:

• Indian ports: Mumbai, Kochi
• Foreign ports: Colombo (Sri Lanka), Phuket (Thailand), Singapore

Passengers embarked and disembarked at Indian ports, and the cruise also offered onboard services such as entertainment, food and beverages, alcohol sales, and shore excursions at various destinations.

Income generated from various streams during the financial year is as follows:

• Ticket price -  Rs. 5 crores
• Entertainment -  Rs. 1.2 crores
• Food and beverages -  Rs. 2.1 crores
• Alcohol sales -  Rs. 1.6 crores
• Guided shore excursions -  Rs. 90 lakhs

In the aforesaid income totalling to Rs 10.8 crores, only the ticket price, primarily for passenger transport, is considered for presumptive taxation purposes. 

• Specified Amount under 44BBC(2)            =  Rs. 5 crores.
• Profit or Income as per section 44BBC (2) =  Rs. 1 crore.

This profit is not eligible for any more deductions, allowances, depreciation, etc.

Practical Challenges under Section 44BBC

• Section 44BBC states that only income derived from the carriage of passengers qualifies for the presumptive scheme under section 44BBC. 
• All the other income is covered under the normal provisions of the act.
• There are many common expenses, like depreciation of the ship, fuel, and other expenses, that need to be attributed to each profit centre.
• The act does not provide a methodology for allocating common expenses across various streams of revenue.
• Since only the other income can claim depreciation and other expenses, not the ticket revenue, there is significant scope for ambiguity, and, as a result, there is a scope for dispute and litigation heavy tax planning.

Section 44BBC vs Section 44B

Since both section 44B and 44BBC deals with presumptive taxation on shipping businesses, there could be a interpretational difficulty in when both the sections are read together. The following table shows the key differences between section 44BBC and 44B.

Compliance Checklist for Filing

• You have to file your returns in ITR-3, as this is a presumptive section applicable only for non-residents. ITR-4 does not apply to non-resident taxpayers, though they opt for the presumptive scheme.
• For foreign companies, ITR-6 is the most appropriate form for tax filing. 
• Nowhere in the act is it restricted that the presumptive scheme under this section needs to be opted for a span of a few assessment years. 
• Therefore, the taxpayer may choose each year whether to opt in or out of the scheme.

Non-Resident Presumptive Tax Schemes under the Income-tax Act

Indian Income Tax Provisions have always encouraged international participation in the Indian economy. From many tax concessions on the income of IFSC companies, special dividend and capital gain tax rates for specified capital assets, to presumptive provisions for certain businesses, non-residents are provided with special provisions. 

Regarding capital-intensive businesses acting as catalysts for national development, the act provides an option for non-residents to opt for the presumptive scheme, as explained below.

Conclusion

Section 44BBC provides significant compliance relaxation for non-resident cruise ship operators, in an effort to directly boost the tourism industry. Since the cruise passengers are usually high income individuals, the ability to generate luxury tourism income is widened in this provision.