Section 227 — Computation of tonnage income. Successor to s.115VG, s.115VH, s.115VX of the 1961 Act.
Section 227 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Sub-section (1) makes a tonnage tax company's tonnage income for a tax year the aggregate of the tonnage income of each qualifying ship, computed under sub-sections (2) and (3). Sub-section (2) gives the formula ti = dti × N, where dti is the ship's daily tonnage income and N the number of days in the tax year, or in the part of it during which the company operated the ship as a qualifying ship.
Sub-section (3) carries the Table fixing daily tonnage income by net tonnage: Rs 70 for each 100 tons up to 1,000 tons; Rs 700 plus Rs 53 for each 100 tons above 1,000 where tonnage exceeds 1,000 but not 10,000; Rs 5,470 plus Rs 42 for each 100 tons above 10,000 where it exceeds 10,000 but not 25,000; and Rs 11,770 plus Rs 29 for each 100 tons above 25,000 where it exceeds 25,000.
Sub-section (4) takes tonnage from the valid certificate referred to in sub-section (9) — "valid certificate" substituted for "certificate" by Act No. 4 of 2026 with effect from 1 April 2026 — and includes deemed tonnage for slot purchase, slot charter and break-bulk vessel sharing arrangements, computed as may be prescribed. Sub-section (5) rounds tonnage to the nearest multiple of hundred tons, ignoring kilograms, up at fifty tons or more and down below fifty. Sub-section (6) bars any deduction or set off, irrespective of anything else in the Act. Sub-section (7) gives each of two or more companies operating a qualifying ship by joint interest or under an agreement for its use a proportionate share where their shares are definite and ascertainable; sub-section (8), subject to that, computes each operator's tonnage income as if it were the only operator.
Sub-section (9) defines "valid certificate": for Indian-registered ships under twenty-four metres, a certificate under the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987, and at twenty-four metres or more an international tonnage certificate under the Convention on Tonnage Measurement of Ships, 1969 as specified in those Rules; for ships registered outside India, a licence issued by the Director-General of Shipping under section 406 or 407 of the Merchant Shipping Act, 1958 specifying net tonnage, or other evidence acceptable to him; and for an inland vessel registered in India, a certificate of registration under the Inland Vessels Act, 2021 — "certificate of registration" substituted for "certificate" by Act No. 4 of 2026 with effect from 1 April 2026.
Tonnage tax replaces measurement of actual shipping profit with a notional daily figure driven by the size of the ship and the days it was operated, so tax does not move with the trading cycle. Because the base is notional, sub-section (6) has to shut out every deduction and set off, or the scheme would produce a lower figure than an ordinary computation. The certificate rules matter because the whole computation runs off a tonnage figure the company does not itself choose.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Daily tonnage income, smallest ships | Rs 70 for each 100 tons | Qualifying ship having net tonnage up to 1,000 | Sub-section (3), Table Sl. No. 1 |
| Daily tonnage income, second band | Rs 700 plus Rs 53 for each 100 tons exceeding 1,000 tons | Net tonnage exceeding 1,000 but not more than 10,000 | Sub-section (3), Table Sl. No. 2 |
| Daily tonnage income, third band | Rs 5,470 plus Rs 42 for each 100 tons exceeding 10,000 tons | Net tonnage exceeding 10,000 but not more than 25,000 | Sub-section (3), Table Sl. No. 3 |
| Daily tonnage income, largest ships | Rs 11,770 plus Rs 29 for each 100 tons exceeding 25,000 tons | Net tonnage exceeding 25,000 | Sub-section (3), Table Sl. No. 4 |
| Rounding of tonnage | To the nearest multiple of hundred tons; up at fifty tons or more, down below fifty; kilograms ignored | Applied before the Table is read | Sub-section (5) |
| Length deciding which Indian certificate applies | Twenty-four metres | Below it, a certificate under the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987; at or above it, an international tonnage certificate under the 1969 Convention | Sub-section (9)(b)(i)(A) and (B) |
| Method of computing deemed tonnage | As may be prescribed — the section states no method | For slot purchase, slot charter and break-bulk vessel sharing arrangements | Sub-section (4)(b) |
The Table is read in two steps and both are easy to get wrong: round the tonnage first under sub-section (5), then apply the band's fixed amount plus its rate for each 100 tons above the band's floor. Because tonnage comes from the valid certificate defined in sub-section (9), and deemed tonnage from slot and sharing arrangements is computed in a manner left to be prescribed, the company does not supply the input itself. The absolute bar in sub-section (6) is what makes this a substitute for the ordinary computation rather than an alternative to it — no expenditure, no depreciation, no brought forward loss. The two 2026 amendments tightened the certificate wording without touching the computation.
A qualifying ship of net tonnage 25,140 tons is operated by the company for a whole 365-day tax year. Rounded under sub-section (5) the tonnage becomes 25,100 tons, the last figure being below fifty. That falls in Table Sl. No. 4, so daily tonnage income is Rs 11,770 plus Rs 29 for the one block of 100 tons above 25,000 — Rs 11,799. Tonnage income is Rs 11,799 × 365 = Rs 43,06,635, and under sub-section (6) not a rupee of expenditure or brought forward loss may be set against it.
In the tonnage income computation filed by a tonnage tax company and in the assessment of that computation. The tonnage comes from the valid certificate described in sub-section (9), so what is actually disputed is usually the certificate relied on, the deemed tonnage from slot or sharing arrangements, or the number of days the ship was operated as a qualifying ship.
TI = DTI × N
The tonnage shall be rounded off to the nearest multiple of hundred tons and for this purpose any tonnage consisting of kilograms shall be ignored
No deduction or set off shall be allowed in computing the tonnage income under this Part of the Chapter, irrespective of anything contained in any other provision of this Act.
the tonnage of a ship or inland vessel, as the case may be, shall be determined as per the valid certificate indicating its tonnage
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See the notifications index.