CBDT has removed TDS from a specific dividend flow inside India's International Financial Services Centres. The notification is listed under the heading "Exemption of TDS from any income in nature of dividend paid by unit of IFSC to a company being unit of IFSC engaged in leasing of aircraft" — CBDT Notification No. 141/2026 [S.O. 6016(E)], dated 4 November 2026, issued by the Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, under F. No. 275/17/2026-IT(B) and signed by Rajendra Kumar Meena, Under Secretary. It specifies that no deduction of tax shall be made under section 393(1) [Table: S.No. 7] of the Income-tax Act, 2025 (30 of 2025) from any income in the nature of dividend paid by a unit of an International Financial Services Centre, primarily engaged in the business of leasing of an aircraft, to a company, being a Unit of an International Financial Services Centre primarily engaged in the business of leasing of an aircraft — provided the receiving company furnishes a statement-cum-declaration in Form No. 1(N) for the tax year concerned.
In plain business-owner language: when one aircraft-leasing company inside an IFSC pays a dividend to another aircraft-leasing company inside the same IFSC framework, the payer does not have to deduct tax at source on that dividend — as long as the receiving company has first given it a signed Form 1(N) for that tax year. The cash reaches the recipient in full, and the paperwork, not a TDS deduction, is what makes the exemption work.
Quick Answer: CBDT Notification No. 141/2026 [S.O. 6016(E)], dated 4 November 2026, specifies no tax shall be deducted under section 393(1) [Table: S.No. 7] of the Income-tax Act, 2025 from dividend income paid by one IFSC aircraft-leasing unit to another unit, provided the payee furnishes Form No. 1(N) for the tax year; the notification is deemed in force from 1 April 2026.
What changed
The notification is issued in exercise of the powers conferred by section 400(1) read with Schedule VI [Table: S.No. 11] of the Income-tax Act, 2025 (30 of 2025). Section 400(1) is the provision under which the Central Government specifies incomes on which no tax is to be deducted, and Schedule VI [Table: S.No. 11] is the entry that carries the exemption for this dividend income. The operative direction is short: no deduction of tax shall be made under section 393(1) [Table: S.No. 7] of the Act from any income in the nature of dividend paid by the payer unit to the payee company described above.
Both sides of the payment must be aircraft-leasing units of an International Financial Services Centre. The payer is any unit of an International Financial Services Centre primarily engaged in the business of leasing of an aircraft. The payee is a company, being a Unit of an International Financial Services Centre primarily engaged in the business of leasing of an aircraft. The notification's own Explanation fixes the three key terms: "aircraft" has the meaning assigned to it in Note 3 of Schedule VI; "International Financial Services Centre" has the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005; and "Unit" has the meaning assigned to it in clause 2(zc) of the Special Economic Zones Act, 2005, as printed in the notification.
The conditions: what the payee must do, what the payer must do
The payee company carries a two-part obligation. First, it must furnish a statement-cum-declaration in Form No. 1(N), annexed to the notification, to the payer, giving details of the tax year in which the dividend income eligible for exemption under Schedule VI [Table: S.No. 11] is payable. Second, it must furnish and verify that statement-cum-declaration in the manner specified in the Form, for that tax year. The declaration is therefore tax-year specific: a Form 1(N) given for one tax year does not, on the face of the notification, cover dividend income of another tax year.
The payer shall not deduct tax on any payment made or credited to the payee after the date of receipt of the copy of the Form 1(N) furnished by the payee. Note the boundary this draws: the no-deduction direction covers payments made or credited after the date of receipt of the form. A dividend paid or credited before the payer receives the form is outside the words of that direction. The payer is not, however, free of reporting: it must furnish the particulars of all such payments on which tax has not been deducted in the statement of deduction of tax under section 397(3)(b) of the Act, read with Rule 219 of the Income-tax Rules, 2026. The dividend still shows up in the payer's TDS statement — reported as a payment on which no tax was deducted, rather than disappearing from the reporting system altogether.
Paragraph 2 authorises the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) to lay down the procedures, formats and standards for the secure capture and transmission of data and the uploading of documents, and to evolve and implement appropriate security, archival and retrieval policies.
Form No. 1(N): what the payee actually files
Form No. 1(N) is titled "Statement-cum-Declaration to be furnished by a Unit engaged in the business of leasing of aircraft (payee) located in International Financial Services Centre to a Unit of International Financial Services Centre (payer)". Unlike its predecessor form under Notification 74/2026, it has a Part A only — there is no Part B in this notification. Part A asks for seven items:
- Name — the full name of the payee.
- PAN — the Permanent Account Number of the payee.
- Name of the unit located in IFSC.
- Address of the unit located in IFSC — country or region, flat, door or building, road, street, block or sector, PIN or ZIP code, post office, area or locality, district and state.
- Contact number — country code and number.
- Email ID.
- Tax year — in YYYY-YY format.
The declaration is signed by the declarant, who gives their PAN and states the capacity in which they sign on behalf of the payee. The declarant declares that the Unit is engaged in the business of leasing of aircraft and that its dividend income is eligible for exemption under Schedule VI [Table: S. No. 11] of the Income-tax Act, 2025, and further declares that the Unit continues to be a Unit of an International Financial Services Centre and continues to be engaged in the business of leasing of aircraft during the tax year in which the statement-cum-declaration is submitted.
The verification is signed by a person competent to sign the return of income under section 265 of the Income-tax Act, 2025. Note 3 to the form records that some information in the form would be pre-filled to the extent possible — so payees should check any pre-filled fields against their own records before signing, rather than assuming the pre-filled entries are correct.
Old vs new: Notification 74/2026 (lease rent) vs Notification 141/2026 (dividends)
Notification 141/2026 does not arrive out of nowhere. CBDT had already built the same Form 1(N) mechanism four months earlier, for a different payment. Notification No. 74/2026 [S.O. 3609(E)], dated 3 July 2026, under F. No. 275/16/2026-IT(B), used Form 1(N) for lease rent and supplemental lease rent paid by a lessee to an IFSC aircraft-leasing lessor. Notification 141/2026 is the dividend counterpart of that measure. The comparison matters, because the two notifications look alike but differ on the points that change compliance:
The dividend exemption is simpler to claim than the lease-rent relief that preceded it: no twenty-year clock to track, no first-unit certification to produce, and a shorter form. But it is also narrower in one respect — the payee must be a company, and both sides must be primarily engaged in aircraft leasing. A dividend paid to an IFSC unit that is not primarily engaged in aircraft leasing is outside the notification's words.
Who is affected
The notification is aimed at the aircraft-leasing cluster inside India's International Financial Services Centres — the units that lease aircraft to airlines and to each other, and that move dividends between group entities within the IFSC. In practice, that means:
- IFSC aircraft-leasing companies receiving dividends from another IFSC aircraft-leasing unit can now receive those dividends without TDS, once they have furnished Form 1(N) for the tax year. The benefit is cash-flow timing: the full dividend arrives without a tax deduction at source, instead of the recipient recovering deducted tax later.
- IFSC aircraft-leasing units paying dividends to another such unit must change their payment process: check for the Form 1(N) before paying, apply no deduction only on payments made or credited after its receipt, and still report the payment in the TDS statement under section 397(3)(b) read with Rule 219 of the Income-tax Rules, 2026.
- Tax advisers and chartered accountants advising IFSC leasing groups must build the Form 1(N) step into the dividend timetable — the form is a precondition for the no-deduction treatment, not a formality that can be completed after the money has moved.
- Groups with both lease-rent and dividend flows between IFSC units now have two parallel Form 1(N) regimes to run: the section 147 lease-rent relief under Notification 74/2026, with its twenty-year limit and first-unit certification, and the Schedule VI dividend exemption under Notification 141/2026, without them. The two forms share a number but are not interchangeable — each serves its own payment and its own legal basis.
The notification is deemed to have come into force on 1 April 2026, by paragraph 3, even though it was notified on 4 November 2026. The Explanatory Memorandum certifies that no person is being adversely affected by giving retrospective effect to the notification. That backdating aligns the dividend exemption with the lease-rent relief under Notification 74/2026, which carries the same deemed effective date of 1 April 2026.
What to do next: steps for payers and payees
- Payee: confirm both sides qualify. Check that the payer is a unit of an IFSC primarily engaged in aircraft leasing, and that the payee is a company, being a Unit of an IFSC primarily engaged in aircraft leasing. If either side fails that description, the notification does not cover the dividend.
- Payee: prepare Form 1(N) for the right tax year. Fill in all seven Part A items — name, PAN, IFSC unit name, full IFSC unit address, contact number with country code, email ID, and the tax year in YYYY-YY format — for the tax year in which the dividend income is payable.
- Payee: sign the declaration and verification properly. Declare that the Unit is engaged in aircraft leasing, that its dividend income is eligible for exemption under Schedule VI [Table: S. No. 11], and that it continues to be an IFSC unit and continues aircraft leasing during the tax year. The verification must be signed by a person competent to sign the return of income under section 265 of the Income-tax Act, 2025.
- Payee: check any pre-filled fields. Note 3 to the form says some information would be pre-filled to the extent possible. Verify every pre-filled entry against the company's own records before signing.
- Payee: deliver the form to the payer before the dividend is paid or credited. The payer's no-deduction duty applies only to payments made or credited after the date of receipt of the form's copy. Send it early and keep proof of the date the payer received it.
- Payer: record the receipt date and apply no deduction only after it. Do not deduct tax under section 393(1) [Table: S.No. 7] on dividend payments made or credited to the payee after the date of receipt of Form 1(N). Dividends paid or credited before that date are not covered by the notification's direction.
- Payer: report the payment anyway. Furnish the particulars of all payments on which tax has not been deducted in the statement of deduction of tax under section 397(3)(b) read with Rule 219 of the Income-tax Rules, 2026. No deduction is not the same as no reporting.
- Both sides: watch for the systems procedures. The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) is authorised to lay down procedures, formats and standards for secure capture and transmission of data and uploading of documents. Check for those procedures before treating the paper process as final.
Timing trap to watch: the no-deduction direction covers only payments made or credited after the payer receives the Form 1(N) copy. A dividend declared and paid before the form reaches the payer is not covered by the notification's words — so the form must travel before the money does, not after it. Diarise the form first, the dividend second.
What the notification does not cover
Three points are marked NOT CHECKED in this article because the notification itself does not address them, and no official clarification has been traced:
- Whether ship-leasing units are covered. NOT CHECKED — the notification says aircraft only. Nothing in its text extends the exemption to dividends paid by or to units engaged in leasing of ships or any other asset, and this article does not assume any such extension.
- Whether the Principal Director General of Income-tax (Systems) procedures and formats have been laid down yet. NOT CHECKED — paragraph 2 authorises those procedures, formats and standards to be laid down, but the notification itself does not contain them, and this article does not state whether they have since been issued.
- Any interaction with the section 147 twenty-year window. NOT CHECKED — the twenty-year limit belongs to the lease-rent relief under Notification 74/2026. Notification 141/2026 does not address whether that window has any bearing on the dividend exemption, and this article does not assume any interaction either way.
Do not advise on any of these three points from this article alone; advisers should check the Act, the Income-tax Rules, 2026, and any later CBDT clarification before acting.
FAQs
What is CBDT Notification 141/2026?
CBDT Notification No. 141/2026 [S.O. 6016(E)], dated 4 November 2026, issued under section 400(1) read with Schedule VI [Table: S.No. 11] of the Income-tax Act, 2025, specifies that no tax shall be deducted under section 393(1) [Table: S.No. 7] from dividend income paid by an IFSC aircraft-leasing unit to a company, being an IFSC aircraft-leasing Unit, subject to the payee furnishing Form No. 1(N).
Which dividends are covered by Notification 141/2026?
Only dividends paid by a unit of an International Financial Services Centre primarily engaged in the business of leasing of an aircraft to a company, being a Unit of an International Financial Services Centre primarily engaged in the business of leasing of an aircraft. Both sides must be primarily engaged in aircraft leasing, and the payee must be a company.
What is Form 1(N) and who furnishes it under Notification 141/2026?
Form No. 1(N) is the statement-cum-declaration annexed to the notification, furnished by the payee company to the payer unit. Its Part A captures the payee's name, PAN, IFSC unit name and address, contact number, email ID and the tax year, followed by a declaration and a verification signed by a person competent to sign the return of income under section 265 of the Income-tax Act, 2025.
Does the payer still have to report a dividend on which no TDS was deducted?
Yes. The payer must furnish the particulars of all such payments on which tax has not been deducted in the statement of deduction of tax under section 397(3)(b) of the Income-tax Act, 2025, read with Rule 219 of the Income-tax Rules, 2026.
From when does CBDT Notification 141/2026 apply?
It is deemed to have come into force on 1 April 2026, under paragraph 3 of the notification. The Explanatory Memorandum certifies that no person is being adversely affected by giving retrospective effect to the notification.
How is Notification 141/2026 different from Notification 74/2026?
Notification 74/2026 (S.O. 3609(E), 3 July 2026) covers lease rent and supplemental lease rent under section 147, with a twenty-year limit and a first-unit certification, and its Form 1(N) has Parts A and B. Notification 141/2026 covers dividend income under Schedule VI [Table: S.No. 11], has no twenty-year limit and no first-unit certification, and its Form 1(N) has Part A only.
Related reading
Sources
- Primary source: CBDT Notification No. 141/2026 [S.O. 6016(E)] dated 4 November 2026 — Gazette of India — incometaxindia.gov.in (official Gazette PDF)
- Prior position: CBDT Notification No. 74/2026 [S.O. 3609(E)] dated 3 July 2026 (lease rent / supplemental lease rent, Form 1(N)) — incometaxindia.gov.in (official Gazette PDF)
Last verified by team: 5 November 2026, against the official Gazette PDF on incometaxindia.gov.in. Every factual claim in this article traces to that notification (and, for the prior position, to Notification 74/2026); points the notification does not address are marked "NOT CHECKED" above.
