Finance Minister Nirmala Sitharaman during her Budget 2021 speech proposed tax benefits for foreign aircraft lessors, as one of the world’s fastest-growing domestic aviation markets looks to establish a local leasing industry, reports Reuters.

FM proposed a tax holiday for aircraft-leasing companies and tax exemptions or airlines paying lease rentals to foreign lessors if they choose to be based in the country’s upcoming international finance hub.

In an effort to compete with Hong Kong and Singapore, India is developing an offshore finance hub called GIFT City (Gujarat International Finance Tec-City) to attract foreign investors with close to zero tax and top-notch infrastructure.

The plan to set up a local aircraft leasing industry was first announced in 2019 but progress has been slow, said Sachit Jolly, partner at Indian law firm DMD Advocates to Reuters.

"This should encourage leasing companies to set up shop, but this lackadaisical attitude of not even notifying regulations for two years should give way to a more proactive approach to make GIFT City and the aircraft-leasing business competitive," he said.

Overall, this is a good move but it may not result in well- established lessors coming into India overnight, said Nitin Sarin, managing partner at law firm Sarin & Co, adding it will benefit newer and smaller lessors like helicopter fleet owners and turbo prop lessors.