CBDT Notification No. 141/2026, dated 4 November 2026 and posted by the Income Tax Department on 6 November, creates a no-TDS mechanism for specified dividend payments within the International Financial Services Centre aircraft-leasing ecosystem. The exemption is conditional: both the payer and the recipient must be qualifying IFSC aircraft-leasing units, the dividend must be eligible under the relevant Schedule VI entry, and the recipient must furnish Form 1(N).
Who is covered?
The notification is narrowly framed around a dividend flowing from one qualifying aircraft-leasing unit to another:
| Party | Required status |
|---|---|
| Dividend payer | A unit of an International Financial Services Centre primarily engaged in the business of leasing aircraft. |
| Dividend recipient | A company that is itself an IFSC unit primarily engaged in the business of leasing aircraft. |
| Dividend income | Income eligible for the exemption under Schedule VI, Table S. No. 11 of the Income-tax Act, 2025. |
All three conditions matter. The notification should not be read as a general waiver for every dividend paid by an IFSC unit, every aircraft-related business or every shareholder of an aircraft lessor.
What exactly changes?
Section 393(1), Table S. No. 7 of the Income-tax Act, 2025 contains the relevant dividend withholding provision. Using the power under section 400(1), read with Schedule VI, CBDT has specified that tax need not be deducted from the qualifying dividend described in the notification.
The relief is therefore from deduction at source on the notified payment. It does not eliminate documentation, return reporting or the payer’s responsibility to test whether the notification applies.
Form 1(N) is the trigger
The recipient must furnish the prescribed statement-cum-declaration in Form 1(N) to the payer for the tax year in which the eligible dividend is payable. The payer may stop deducting tax only for a payment made or credited after receiving that form.
The form records:
- the payee’s full name and PAN;
- the name and address of the IFSC unit;
- contact number and email address;
- the relevant tax year;
- a declaration that the unit is engaged in aircraft leasing and that its dividend income is eligible under Schedule VI; and
- confirmation that the unit continues to operate in the IFSC and remains engaged in aircraft leasing during that tax year.
The declaration must be verified and signed by a person competent to sign the payee’s income-tax return under section 265 of the Income-tax Act, 2025. Some fields may be pre-filled when the prescribed system process is implemented.
The timing rule deserves attention
The notification is deemed effective from 1 April 2026, but the operating condition is linked to the date on which the payer receives Form 1(N). This produces an important control point:
| Situation | Practical treatment |
|---|---|
| Form received before dividend payment or credit | The payer may apply the notification to that subsequent eligible payment or credit. |
| Dividend already paid or credited before Form was received | The notification does not instruct the payer to treat that earlier event as automatically covered. Review the actual withholding and correction position separately. |
| Form refers to another tax year | Do not reuse it. Form 1(N) is furnished for the tax year in which the eligible dividend is payable. |
The notification’s retrospective commencement should therefore not be confused with automatic retrospective validation of every earlier non-deduction.
No deduction does not mean no reporting
The payer must disclose all qualifying dividend payments on which tax was not deducted under this notification in the prescribed statement of deduction of tax. The notification links this reporting to section 397(3)(b) of the Income-tax Act, 2025 and rule 219 of the Income-tax Rules, 2026.
This is a reporting exemption structure, not an omission structure: the payment remains visible in the withholding-tax compliance trail even though the deduction amount is nil.
What should the recipient unit do?
- Confirm eligibility. Document that the company is an IFSC unit, remains operational there and is primarily engaged in aircraft leasing.
- Test the dividend income. Confirm that the dividend is eligible under Schedule VI, Table S. No. 11 rather than relying only on the unit’s location or business description.
- Prepare one form for the relevant year. Complete Form 1(N) with the correct tax year, PAN, IFSC-unit details and authorised signatory.
- Deliver before payment or credit. Obtain dated evidence that the payer received the form before the dividend event on which no TDS is expected.
- Retain supporting records. Preserve the form, IFSC approval, business evidence, dividend resolution and documents supporting Schedule VI eligibility.
What should the payer unit do?
- Check both parties. Verify that the payer and payee satisfy the exact unit and aircraft-leasing conditions in the notification.
- Validate Form 1(N). Check the PAN, tax year, IFSC details, declaration and authority of the signatory.
- Timestamp receipt. Link the form’s receipt date to each payment or credit because the non-deduction operates only after receipt.
- Configure the tax code carefully. Use a specific no-deduction reason rather than a generic nil-rate code, and retain an auditable link to the form.
- Report the payment. Include every covered dividend in the prescribed TDS statement even though no tax is deducted.
- Review earlier events separately. If tax was already deducted, or a payment was made before the declaration arrived, assess the correction or refund route on its own facts.
What the notification does not cover
The relief does not, by itself, cover:
- a dividend paid to a shareholder that is not a qualifying company-unit in an IFSC;
- a payer or recipient not primarily engaged in aircraft leasing;
- income that does not satisfy the specified Schedule VI exemption entry;
- a payment or credit made before the payer receives Form 1(N); or
- any non-dividend payment merely because both parties operate in an IFSC.
Reviewed on 11 November 2026. The notification is deemed effective from 1 April 2026, but the no-deduction treatment applies to an eligible payment or credit only after the payer receives the tax-year-specific Form 1(N).