Aircraft leasing companies based out of GIFT city in Gujarat's Gandhinagar would get a tax holiday on capital gains and rental income earned, Finance Minister Nirmala Sitharaman announced on Monday.
At present, there are no aircraft leasing companies in Gujarat International Finance Tec (GIFT) city.
"I propose to include, among others, tax holiday for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors... located in IFSC (International Financial Services Centre)," the minister said in her budget speech.
No major aircraft leasing companies are based in India. Majority of the aircraft fleet with the Indian carriers have been leased from foreign companies such as Avolon, GECAS, BBAM, BOC Aviation and Dubai Aerospace Enterprise Capital.
The government's budget announcement about tax holiday is to attract these leasing companies to establish an office in GIFT city so that the Indian airlines can do rental payment in rupees instead of USD.
Remi Maillard, the president and managing director of Airbus India and South Asia, called the finance minister's announcement a "significant" one as it would provide some relief to the Indian carriers who are bleeding cash due to the COVID-19 pandemic.
Airbus is one the two largest aircraft manufacturers in the world. Other one is Boeing.
"The proposal sits well with India's desire to develop a local aircraft leasing and financing industry to accelerate the maturity and 'Atmanirbharta' of the Indian aviation industry," said Maillard, who is also the chairman of Civil Aviation Committee of industry body FICCI.
Tax support for aircraft leasing and rentals will help grow the fleet size in India as a vast majority of these aircraft will likely be leased, he added.