Five per cent is the profit measure, not the tax rate
For the specified non-resident aircraft-operation business, section 61(2), Table serial number 3 of the Income-tax Act, 2025 computes business profit as 5% of A plus B. Checked on 28 October 2026, this guide concerns tax year 2026–27. It isolates the domestic receipt-population working, distinct from a treaty Article 8 analysis and from an earlier-period return under the 1961 Act. Do not describe the five-per-cent profit measure as the final income-tax or withholding rate. Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026, section 61.
Classify carriage origin before receipt location
A covers the stated passengers, livestock, mail or goods carried from a place in India, with amounts paid or payable in or outside India to the assessee or another person on its behalf. B covers the stated carriage from a place outside India, with receipt or deemed receipt in India. Flight origin and receipt location are therefore different data dimensions. The examples stipulate the legally relevant carriage origin and do not decide complex connecting-flight or bundled-contract issues. Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026, section 61.
Reconcile payable amounts and agent collections
An India-origin amount still payable can belong in A even if not yet collected. An agent's collection on the operator's behalf must be assessed under the stated wording rather than omitted because the airline's own bank account was not credited. Equally, an agent remitting a collection already included must not create a second receipt. Keep booking, contract, carriage, collection and settlement identifiers linked so the population can be reproduced. Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026, section 61.
Keep foreign-origin receipts outside the model where the limb is not met
A genuinely foreign-origin amount received outside India, with no deemed receipt in India under the stipulated facts, does not enter B merely because the operator also has Indian business. That exclusion from this isolated limb does not decide every tax consequence of the transaction. Review receipt character, treaty entitlement and other applicable provisions independently before finalising the return. Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026, section 61.
Do not subtract operating expenses from the deemed profit again
Section 61(4) prohibits the stated losses, allowances or deductions against income computed under subsection (2). Subsection (5) addresses the deemed depreciation basis for WDV. The lower-actual-profit route in subsection (3) names Table serial numbers 4 and 5, not this aircraft row. Keep the book result and statutory profit working separate. These models do not establish that a different treaty result is unavailable; that remains a distinct legal analysis. Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026, section 61.
Close a transaction-level bridge
Prepare A, B, excluded amounts and duplicate settlements in separate columns. Sum the supported populations once, calculate the five-per-cent profit and reconcile the book-to-tax difference. Keep currency conversion, final tax rates, treaty documentation and filing obligations in separately verified schedules. A convenient percentage applied to total global turnover is not a substitute for the statute's geographical and receipt tests. Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026, section 61.
Applicable primary references
Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026, section 61
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: India-origin amount received abroad
Assume stipulated India-origin qualifying carriage ₹200 lakh is paid outside India. It enters A. With no B, stated profit is ₹10 lakh; foreign collection alone does not remove it from A.
Illustrative example 2: Foreign-origin receipt in India
Assume qualifying foreign-origin carriage amounts ₹80 lakh are received in India and no other amounts apply. B is ₹80 lakh and stated profit ₹4 lakh.
Illustrative example 3: Foreign-origin receipt outside India
Assume ₹100 lakh qualifying India-origin A and separate ₹60 lakh foreign-origin carriage received abroad, with no deemed receipt in India. The isolated A-plus-B base is ₹100 lakh, producing ₹5 lakh profit; the ₹60 lakh is not added to B under these stipulated facts.
Illustrative example 4: Include the unpaid qualifying amount
Assume India-origin qualifying carriage ₹150 lakh comprises ₹120 lakh collected and ₹30 lakh still payable. A is ₹150 lakh and profit ₹7.50 lakh, not ₹6 lakh based only on collected cash.
Illustrative example 5: Do not double-count agent remittance
Assume an authorised agent collects ₹40 lakh on behalf of the operator for qualifying India-origin carriage, then remits the same ₹40 lakh. A is ₹40 lakh once, giving ₹2 lakh profit, not ₹4 lakh on a duplicated ₹80 lakh base.
Illustrative example 6: Keep operating costs separate
Assume A ₹300 lakh and B ₹100 lakh, with book operating expenses ₹350 lakh. The statutory base is ₹400 lakh and profit ₹20 lakh. The book ₹50 lakh margin does not replace the stated ₹20 lakh computation, and the ₹350 lakh is not deducted again from that deemed profit.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the statutory business and status | Non-resident aircraft-operation population |
| 2 | Review separate treaty applicability | Residence, entitlement and relevant article |
| 3 | Establish carriage origin | Contract and actual movement evidence |
| 4 | Classify India-origin sums | Paid/payable anywhere and on-behalf amounts |
| 5 | Classify outside-India carriage receipts | Actual/deemed receipt in India |
| 6 | Trace agents and settlements | Collection IDs and no duplicate remittance |
| 7 | Reconcile excluded populations | Origin/receipt conclusions and separate legal review |
| 8 | Calculate the stated profit | Five per cent of supported A plus B |
| 9 | Check expense and WDV consequences | Section 61(3)–(5) and separate book result |
| 10 | Complete the tax and filing review | Currency conversion, actual tax rates and evidence |
Sixteen practitioner FAQs
1. Is five per cent the final tax rate?
No. It is the stated business-profit computation percentage.
2. Which table row is addressed?
Section 61(2), Table serial number 3 for the specified non-resident aircraft business.
3. Does payment abroad exclude India-origin carriage?
No. A expressly includes paid or payable amounts in or outside India.
4. Does A require actual collection first?
Its wording includes amounts payable, subject to correct classification and timing.
5. What does B focus on?
The stated outside-India carriage amounts received or deemed received in India.
6. Are all foreign-origin global receipts automatically B?
No. Apply the receipt or deemed-receipt condition.
7. Do passengers alone qualify as carriage population?
The row also names livestock, mail and goods.
8. Can collection by another person matter?
Yes. The row includes the stated on-behalf amounts.
9. Does the agent's remittance create another receipt automatically?
No. Trace the same economic amount to avoid duplicate inclusion.
10. Do the examples decide connecting-flight classification?
No. Their legally relevant origins are expressly stipulated.
11. Can operating expenses be deducted again from the computed profit?
Section 61(4) prevents the stated further losses, allowances or deductions against that income.
12. Does subsection (3)'s lower-profit route expressly name aircraft row 3?
No. It names Table serial numbers 4 and 5.
13. Can WDV ignore the section's depreciation assumption?
No. Review subsection (5)'s stated consequence.
14. Does this article determine treaty Article 8 entitlement?
No. Treaty application is independently analysed.
15. Can global turnover replace the A/B reconciliation?
No. Establish the statutory population before applying the percentage.
16. What completes the workpaper?
Receipt classification, duplicate checks, the profit calculation and separately verified conversion, treaty, tax and filing conclusions.
Conclusion
Separate India-origin carriage amounts paid or payable anywhere from outside-India carriage receipts received or deemed received in India before computing the stated profit.