A foreign company runs a cruise ship that calls at Indian ports. Passengers pay fares, some of them in India and some abroad. The question that follows is simple: how much of those fares does India tax as profit?

For a non-resident cruise operator, the tax law gives a fixed answer instead of asking for a profit and loss account. This article explains that answer: the rule, who it covers, the conditions, which years it applies to, and what changes when the Income-tax Act, 2025 takes over. It is general information, not advice on any particular operator.

## The rule in one line

Under section 44BBC of the Income-tax Act, 1961, a non-resident engaged in the business of operation of cruise ships, subject to prescribed conditions, is deemed to earn profits equal to twenty per cent of the aggregate of two amounts (section 44BBC(1), Income-tax Act 1961). That deemed sum is chargeable under the head "Profits and gains of business or profession".

The two amounts are listed in section 44BBC(2), Income-tax Act 1961:

- the amount paid or payable to the assessee, or to any person on the assessee's behalf, on account of the carriage of passengers; and
- the amount received or deemed to be received by or on behalf of the assessee on account of the carriage of passengers.

So the starting figure is passenger-carriage receipts, counted whether they are paid or payable (the first limb) or received or deemed to be received (the second limb). Twenty per cent of the total is the business profit for tax purposes.

The section opens with the words "Notwithstanding anything to the contrary contained in sections 28 to 43A" (section 44BBC(1), Income-tax Act 1961). Those sections are the ordinary rules for computing business profit, including the deduction of expenses and depreciation. Under 44BBC they do not decide the result. The deemed profit is a fixed percentage of receipts, and the actual costs of running the ship do not change it.

## Who it covers

The section applies to an assessee who is a non-resident and is engaged in the business of operation of cruise ships (section 44BBC(1), Income-tax Act 1961). Two points follow from the text.

First, it is about operation of cruise ships. A person who only leases a cruise ship to an operator is not described by the section. That lessor has its own provision, described below.

Second, the section works with a companion amendment. Section 44B of the 1961 Act, the older presumptive provision for non-resident shipping, was amended so that its heading now reads "Special provision for computing profits and gains of shipping business other than cruise shipping in case of non-residents". In its sub-section (1), the words "other than cruise ships referred to in section 44BBC" were inserted (Finance (No. 2) Act 2024, section 16). Cruise ships therefore sit under 44BBC, and other shipping stays under 44B.

## The conditions

Section 44BBC applies "subject to such conditions as may be prescribed" (section 44BBC(1), Income-tax Act 1961). The Act does not list the conditions itself; the rules do.

For the Income-tax Act, 2025 regime, the conditions are in rule 44 of the Income-tax Rules, 2026, which came into force on 1 April 2026 (rule 1(2), Income-tax Rules, 2026). The rule is headed "Conditions to be fulfilled by a non-resident, engaged in the business of operation of cruise ships under section 61(2) [Table: Sl. No. 2]". It says the non-resident assessee shall:

- (a) operate a passenger ship having a carrying capacity of more than two hundred passengers or length of seventy-five meters or more, for leisure and recreational purposes and having appropriate dining and cabin facilities for passengers;
- (b) operate such ship on scheduled voyage or shore excursion touching at least two sea ports of India or same sea ports of India twice;
- (c) operate such ship primarily for carrying passengers and not for carrying cargo; and
- (d) operate such ship as per the procedure and guidelines if any, issued by the Ministry of Tourism or Ministry of Ports, Shipping and Waterways.

(Rule 44, Income-tax Rules, 2026.)

A caution on versions. The four conditions above are the text of the 2026 Rules and are stated here for the 2025 Act table row only. For years governed by the 1961 Act, the conditions are prescribed under the Income-tax Rules, 1962 (the official mapping of 1961-Act provisions to the 2025 regime pairs rule 6GB of the 1962 Rules, headed as the conditions for section 44BBC, with rule 44 of the 2026 Rules). This article does not state what rule 6GB says. Read that rule itself before relying on any condition for a 1961-Act year.

## Which years it applies to

Section 44BBC was inserted "with effect from the 1st day of April, 2025" (Finance (No. 2) Act 2024, section 17). The Act gives a date, not an assessment year. A provision effective from 1 April 2025 operates from assessment year 2025-26 (income of the year ended 31 March 2025) onward, which is how this article reads it. Assessment year 2026-27, for income of financial year 2025-26, is the last year in which the 1961 Act is the charging law, so section 44BBC applies there as well.

The Finance Act 2025 inserts a new section 44BBD immediately after section 44BBC, with effect from 1 April 2026 (Finance Act 2025, section 11). That is a separate presumptive provision for certain non-residents providing services or technology for electronics manufacturing in India; it does not amend section 44BBC. The Finance Act 2026 does not amend section 44BBC. A later notification or amendment is always possible, so confirm the current text on the official portal before you file.

## From tax year 2026-27: section 61 of the 2025 Act

The Income-tax Act, 2025 comes into force on 1 April 2026 (section 1(3), Income-tax Act 2025), so tax year 2026-27 (financial year 2026-27) onward is governed by it. How income of earlier years is saved under the 1961 Act is a transition question this article does not cover. The 1961-to-2025 mapping table links section 44BBC of the 1961 Act with section 61 of the 2025 Act, titled "Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents". Section 44B of the 1961 Act maps to the same section 61.

Section 61 works through a table. Its sub-section (1) disapplies sections 26 to 54 "to the extent contrary to this section" for the specified business, and sub-section (2) fixes the computation (section 61(1) and (2), Income-tax Act 2025). Serial number 2 of the table covers the "Business of operation of cruise ships (subject to the conditions as may be prescribed)", for a "Non-resident", with profits and gains of "20% of (A+B)", where:

- A is the sum on account of carriage of passengers, paid or payable to the assessee or any other person on the assessee's behalf; and
- B is the sum on account of carriage of passengers, received or deemed to be received by the assessee or any other person on the assessee's behalf.

(Section 61(2), Table, Sl. No. 2, Income-tax Act 2025.)

The percentage and the two amounts match the 1961 Act. Serial number 1 of the same table, for ships other than cruise ships, uses a different rate: "7.5% of (A+B)". Which row applies depends on whether the vessel is a cruise ship under the conditions above.

The conditions for the 2025 Act row are in rule 44 of the Income-tax Rules, 2026, quoted earlier.

## The lessor of a cruise ship

A foreign company that owns a cruise ship and leases it to a group company operating in India is not a section 44BBC taxpayer. The 1961 Act treats this separately, in section 10(15B). It exempts income of a foreign company from lease rentals of cruise ships, received from a "specified company" which operates the ship in India. Both must be subsidiaries of the same holding company, and the income must arise for a relevant assessment year beginning on or before 1 April 2030 (Finance (No. 2) Act 2024, section 4, inserting clause (15B) in section 10 of the 1961 Act).

A "specified company" means any company, other than a domestic company, which operates cruise ships in India and opts to pay tax under section 44BBC (Explanation (a) to section 10(15B), Income-tax Act 1961). So the exemption for the lessor is tied to the operator choosing 44BBC. That linkage is the reason the two provisions should be read together.

Under the 2025 Act, the counterpart is Schedule III, serial number 9, which uses the words "relevant tax year beginning on or before the 1st April, 2029" and defines "specified company" by reference to "section 61(2) (Table: Sl. No. 2)" (Note 1, Income-tax Act 2025). The 2025 Act schedule and the 1961 Act clause use different dates (1 April 2029 and 1 April 2030), so do not carry a date across from one Act to the other.

## Step by step: working out the taxable profit

Here is how an operator or its adviser would reason, using only the text above. The numbers below are made up to show the arithmetic.

1. Confirm the vessel and the voyages meet the prescribed conditions. Section 44BBC and section 61(2), Table, Sl. No. 2, both apply "subject to" the prescribed conditions.
2. Add up the passenger-carriage amounts. Take the amounts paid or payable to the assessee or to anyone on its behalf, and the amounts received or deemed to be received by or on its behalf. This is the "aggregate" in section 44BBC(1).
3. Take twenty per cent. If the aggregate were ₹100 crore, the deemed profit would be ₹20 crore.
4. Report that sum as business income. It is chargeable under "Profits and gains of business or profession" (section 44BBC(1), Income-tax Act 1961).
5. Do not deduct actual running costs against it. The section is a substitute for sections 28 to 43A of the 1961 Act.

For tax year 2026-27 onward, the same steps apply with section 61(2), Table, Sl. No. 2, of the Income-tax Act, 2025.

## What not to do

- Do not mix up the two Acts. For assessment year 2026-27 and earlier, cite section 44BBC of the Income-tax Act, 1961. For tax year 2026-27 onward, cite section 61 of the Income-tax Act, 2025.
- Do not apply the 7.5 per cent shipping rate to a cruise ship that qualifies under the cruise conditions. Cruise operation has its own row.
- Do not assume the conditions are met because the ship carries passengers. Capacity or length, the port-call pattern, the passenger-versus-cargo test and the guideline compliance are all part of the text.
- Do not treat a mapping table as law. Read the section and rule text of the Act that applies to the year in question.
- Do not rely on this article for a live position. Rates, conditions and dates can be changed by later law.

## What to do now

- **Next step:** Identify whether your income falls in an assessment year under the 1961 Act (section 44BBC, Income-tax Act 1961) or a tax year under the 2025 Act (section 61(2), Table, Sl. No. 2, Income-tax Act 2025), and check the ship against the prescribed conditions (rule 44, Income-tax Rules, 2026, and rule 6GB, Income-tax Rules, 1962, for 1961-Act years).
- **Start date:** Section 44BBC was inserted with effect from 1 April 2025, so it operates from assessment year 2025-26 (Finance (No. 2) Act 2024, section 17).
- **Consequence of getting it wrong:** The section applies only "subject to such conditions as may be prescribed" (section 44BBC(1), Income-tax Act 1961). If your facts do not fit the conditions, do not assume the 20 per cent basis; take advice on how the income is to be computed.

Have a CA review your facts before you act or file.

## FAQs

**What rate does section 44BBC use?**
Twenty per cent of the aggregate of passenger-carriage amounts paid, payable, received or deemed received (section 44BBC(1) and (2), Income-tax Act 1961).

**Does it apply to Indian cruise companies?**
No. The section is limited to an assessee who is a non-resident (section 44BBC(1), Income-tax Act 1961).

**From which assessment year does it apply?**
It was inserted "with effect from the 1st day of April, 2025" (Finance (No. 2) Act 2024, section 17). A provision effective from that date operates from assessment year 2025-26.

**What replaces section 44BBC from tax year 2026-27?**
Section 61 of the Income-tax Act, 2025, row 2 of its table, which also uses 20 per cent of (A+B) (section 61(2), Table, Sl. No. 2, Income-tax Act 2025).

**Is a cruise ship lessor covered?**
Not by section 44BBC. The lessor's lease rentals are dealt with in section 10(15B) of the 1961 Act, subject to its conditions (Finance (No. 2) Act 2024, section 4).

**Where are the conditions?**
They are prescribed in rules. Rule 44 of the Income-tax Rules, 2026 sets four conditions for the 2025 Act table row. For 1961-Act years, read rule 6GB of the Income-tax Rules, 1962.

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