Our Bureau

New Delhi, Feb. 28

The Union Budget 2006-07 has provided some relief to the domestic aviation sector while international air travel and travel by cruise ships is set to become slightly more expensive.

The Budget has extended the exemption for domestic airlines on income tax they would have had to pay on lease payments for an aircraft or aircraft engine by one more year. The tax, that could be as high as 42 per cent depending on which country the aircraft or engine is being leased from, was to come into effect from April 1.

The Budget, however, has also proposed levying a 12 per cent cess on air passengers flying abroad in business or first class and on travel on cruise ships.

However, the Fringe Benefit Tax would be levied at 5 per cent instead of 20 per cent for airline companies and shipping industry to value the benefits in the form of `hospitality' and `use of hotel and lodging facilities.

The decision to extend the exemption on income tax on lease payments for an aircraft or aircraft engine by one year will benefit almost all the domestic airlines.

While the state-owned Indian Airlines is looking to lease 10 aircraft including five widebody aircraft, the low-cost airline, Air Deccan this year alone has signed lease agreement for seven Airbus A-320 aircraft.

The Government has also provided a Budgetary support of Rs 325 crore to Indian Airlines.

The funds are to be utilised by the airline to finance its Rs 9,890-crore 43-Airbus fleet acquisition plan.

The airline signed the purchase agreement with Airbus Industrie during the recent visit of the French President.

(This article was published in the Business Line print edition dated March 1, 2006)
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