The finance ministry is likely to reintroduce a withholding tax on aircraft lease rentals in Budget 2007-08. Airlines entering into lease agreements up to March 31, 2007 are currently exempt from the tax.
The move will adversely impact private carriers’ expansion plans beyond the current fiscal. According to private airlines, lease rentals are as high as 20-25% of their operational costs. The withholding tax itself can be as high as 48% of the annual lease rental, depending on the country where the lessor is based.