India to Consider More Incentives for Aircraft Leasing in GIFT City

India is working on a proposal to extend the profit-linked tax holiday for aircraft leasing companies operating in Gujarat International Finance Tec-City (GIFT City). The benefit, which currently runs for 10 years, may be increased to 15 years, according to the news reports. 

How Leasing Profits Typically Build Up 

Aircraft leasing margins stay low in the early years, around 1%, largely because depreciation costs take up most of the income.  

Profit improves in the later years of the lease and can rise to about 40% once depreciation slows. Extending the tax holiday would cover this later period, when lessors earn most of their returns. 

India’s Share of the Global Leasing Market 

The proposed change is expected to be included in the February budget. India is looking to expand its participation in the global aircraft leasing industry, which is valued at roughly $187 billion.  

Ireland remains the largest centre, handling close to half of the world’s leased aircraft, while China, Singapore and Malaysia are also active hubs. 

Current Activity Within GIFT City 

As of 31 January, 33 leasing companies were registered in GIFT City. These firms have arranged leases for more than 60 aircraft and engines, according to KPMG data.  

India’s own leasing market is still small at about $4.7 billion in 2023, but Cognitive Market Research estimates an annual growth rate of 11.8%. 

Expansion of Financial Services at the Hub 

This follows plans to build GIFT City as a financial centre, which has seen institutions such as Mitsubishi UFJ Financial Group and HSBC set up operations.  

The project has been developed over nearly two decades as a location for multiple financial and business activities, including aviation finance. 

Airlines and Leasing Units Already in Place 

If approved, the extended tax break would apply to leasing arms of major Indian airlines, including InterGlobe Aviation Financial Services IFSC Pvt. (IndiGo) and AI Fleet Services IFSC Ltd. (Air India).  

Akasa Air has applied for permission to establish a leasing entity. Subsidiaries of international firms, including Rolls-Royce’s RRPF Engine Leasing, CRJ Aviation Leasing, and Willis Lease Finance India, are already present. 

Read More: India-US Sign Deal Worth ₹7,995 Crore to Support Indian Navy’s MH60R Helicopter Fleet! 

Conclusion 

The proposed extension is intended to increase leasing activity in GIFT City and strengthen India’s position in the global aircraft leasing segment. 

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