Mumbai-based shipping and dredging company Knowledge Marine & Engineering Works on Tuesday said it has received approval to shift from the regular corporate tax regime to the tonnage tax scheme, with effect from the assessment year 2026–27. The approval will remain valid for a period of 10 years.
Under the tonnage tax scheme, a company’s tax liability is calculated on the basis of the net tonnage of vessels operated, rather than on actual profits, offering a fixed and predictable taxation framework.
The move follows changes announced in the Union Budget 2025, under which the Centre extended the tonnage tax regime to inland vessels to boost investment in inland water transport. As per the amended provisions, inland vessels will be treated on par with seagoing ships for taxation purposes. These amendments will come into effect from April 1, 2026, and will apply from assessment year 2026–27 for 10 subsequent years.
To qualify under the tonnage tax regime, vessels must be registered under the Inland Vessels Act, 2021, and have a minimum gross tonnage of 100 tonnes. Companies opting for the scheme are also required to transfer at least 20 per cent of book profits from tonnage tax activities to a designated reserve, which must be utilised for acquiring vessels within eight years. Tax is levied on deemed income, calculated using fixed rates linked to vessel tonnage slabs.
Knowledge Marine said the transition to the tonnage tax regime is expected to reduce its effective tax liability and provide greater certainty on tax outgo. The company added that improved cash flows would support its capital expenditure plans, including fleet expansion, and strengthen its competitiveness while bidding for inland and coastal shipping projects. The predictable tax framework is also expected to limit exposure to earnings volatility and aid long-term business planning.
