Section 230 of the Income-tax Act, 2025 — Exclusion of Deduction, Loss, Set Off, etc. under the Tonnage Tax Scheme

In plain language

What Section 230 is about

Section 230 sits inside the special tonnage tax scheme for Indian shipping companies (Sections 227 to 241 of the Income-tax Act, 2025). Under this scheme, a qualifying shipping company does not pay tax on its actual book profits from operating ships. Instead, it pays tax on a notional "tonnage income" worked out from the net tonnage (carrying capacity) of each ship. Because the income is already a concessional, formula-based figure, the law must stop the company from shrinking it further with normal deductions, depreciation and old losses. That "ring-fencing" job is exactly what Section 230 does.

In one line: Section 230 makes the tonnage tax regime a self-contained code — once you are inside it for your shipping business, you cannot claim ordinary business deductions, cannot carry forward or set off shipping losses, and cannot use Chapter VIII (deductions like the old 80-series) against tonnage income.

Who it applies to

• Only companies that are qualifying shipping companies and have validly opted into the tonnage tax scheme.
• It applies only to the "relevant shipping income" — the business of operating qualifying ships. Any other (non-shipping) business the company runs is taxed normally.
• It operates for every tax year the company remains under the scheme (the option is generally locked in for 10 years).

The four key restrictions in Section 230(1)

• (a) Deductions treated as already given: Sections 28 to 52 (the normal business-income computation rules, including depreciation) are applied as if every loss, allowance or deduction had been fully given effect to in each tonnage tax year. So even though you are not actually reducing income by these, they are deemed used up — you cannot save them for later.
• (b) No carry forward / set off of shipping losses: Losses of the qualifying-ship business referred to in Sections 108(1)/(2)(a), 109, 112(1) and 116(1) cannot be carried forward or set off while under the scheme, to the extent they relate to operating qualifying ships.
• (c) No Chapter VIII deductions: Deductions under Chapter VIII (the Act's Chapter of profit-linked and payment-based deductions, the successor to the old Chapter VI-A / 80-series) are not allowed against relevant shipping income.
• (d) Depreciation written down anyway: The written-down value of the ships and other assets is computed as if depreciation had actually been claimed and allowed in each tonnage tax year. So when the company exits the scheme, it cannot suddenly claim "unused" depreciation — the WDV has already been reduced.

Pre-scheme losses and apportionment — Sections 230(2) to (4)

• Losses from before you joined (230(2)): Any brought-forward loss that relates to the shipping business and had accrued before the company opted in is treated as if it has been set off against relevant shipping income in the tonnage years. In practice this means such losses are absorbed/extinguished and give no separate benefit.
• Ring-fencing of losses (230(3)): Losses relating to the tonnage tax business cannot be set off against any income other than relevant shipping income.
• Reasonable-basis split (230(4)): Where a company runs both shipping and non-shipping activities, any apportionment needed to identify the shipping-related losses must be done on a reasonable basis.

How it interacts with related sections

• Tonnage income computation: The notional income is fixed by the tonnage slabs and days operated — Section 230 protects that figure from erosion.
• Set-off / carry-forward Chapter: Sections 108, 109, 112 and 116 (intra-head, inter-head and carry-forward of business losses/depreciation) are switched off for shipping income during the scheme.
• Conditions and validity: Read with Sections 231 (opting and validity) and 232 (conditions for applicability). Breaching conditions can throw the company out of the scheme, after which normal rules resume.

Practical implications

• The scheme is a package deal: predictable, low tonnage tax, but you surrender depreciation, deductions and loss reliefs on the shipping side.
• Companies should model both routes before opting in — the tonnage route usually wins for profitable fleets but can be costly if the shipping business is loss-making.
• Keep clean records separating shipping and non-shipping activity so the "reasonable basis" apportionment survives scrutiny.
• Do not expect to "bank" losses or depreciation for use after exit — Section 230 deems them consumed.