Taxation Rules Applicable on seafarers in India

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Taxation Rules Applicable on seafarers in India

A seafarer – is any traveler via seas, classifying their work based on the rank or type of job as merchant navy, navy worker or mariner in a boat or ship. A seafarer holds vary of ranks and position on water-born vessel and helps the crew member with their allotted discrete operation. Crew members include captain, second officer, deck cadet, chef, engineers etc. the affiliates of the crew is decided upon the size of the vessel, geographical location, administration etc.

The remuneration received by the seafarer falls under the purview of salary and tax is levied upon an individual for an accrued income in the financial year. From the perspective of the Income Tax Act 1961, any income earned during the stay in the country is liable for tax payment i.e. the payment of tax is précised on their residential status.

Note – Seafarers uses NRE/NRO bank accounts and operates.

Table of Content:

Though the accumulation of taxes in India are classified and charged based on the residential status of an individual, there’s no specific provision in the Income Tax Act, 1961 for exempting the income of seafarers.

Determining the residential status of Seafarer

  • Resident – Minimum days of stay 182 days or more in a financial year.  (Must pay Tax)
  • Resident and Ordinary Resident
    • A seafarer stays in India for more than 182 days in a financial year
    • A seafarer is a resident of India at least for 2 financial years out of preceding 10 financial years, or
    • A seafarer stays in India for more than 729 days in previous 7 financial years. (Must pay Tax)
  • Resident and Non – Ordinary Resident
    • A seafarer stays in India for more than 182 days.
    • A seafarer is a non-resident Indian (NRI) in any 9 financial years out of 10 financial years, or
    • A seafarer stays in India for less than 729 days in the preceding 10 financial years. (Need not pay tax)

Calculation of Income Tax of Indian seafarers

It’s purely based on the residential status of an individual who’s employed in a vessel.

residential status of an individual

non-residential status of an individual

Taxation rules and Amendments on seafarers

  • Amendment dated 7th August 2015: Though section 6 of Income Tax laid down the satisfactory rules for being a resident based on the number of days during the previous year the same fails to adhere to foreign bound ships carrying either the freight or passengers having the destination of voyage outside India which causes uncertainty to determine the period of stay for an Indian citizen being in the crew.    Thus, the CBDT has via Notification No. 70/2015/F.No.142/12/2015-TPL conferred that section 6(1) of Income Tax Act read with section 295 inserted Rule 126 in Income Tax Rules, 1962 to configure and compute the stay of a seafarer.
  • Rule 126 of Income Tax Rules, 1962: an individual, being a citizen of India boarding a vessel being  the crew member for a voyage, in such case the stay of such individual in India shall be calculated from the date entered into the Continuous Discharge Certificate in respect of joining and ending the duty in a ship by the said individual.
    Taxation rules and Amendments on seafarers

    • Voyage start and end outside India :The date of stamp on the passport and CDS are taken into  consideration for calculating the period outside India.
    • Voyage start and end in India:CDS dates represent the dates for calculating the residential status. The calculation is done based on the voyage undertaken by the ship internationally carrying either the passenger or freight having its origin or destiny port in India.
  • Financial Year 2020-2021: When a seafarer stays 182 days or more fulfils the category for being a resident. Budget 2020 introduced a provision in relation to residential status by decreasing the number of days from 184 to 120 days for classifying the residential status. But, the new rule of 120 days is applicable for those whose income exceeds 15 lakhs.Even if the seafarer stays in India for more than 120 days and falls in the purview of taxable income the residential status of such person will be Resident and Non- Ordinary Resident for the current financial year i.e. the seafarer will fulfill the condition of Resident and Non – Ordinary Resident –

    • A seafarer stays in India for more than 182 days.
    • A seafarer is a non-resident Indian (NRI) in any 9 financial years out of 10 financial years, or
    • A seafarer stays in India for less than 729 days in the preceding 10 financial years need not to pay tax. Hence, making them get an exemption from paying tax.

seafarer taxation

Conclusion

Seafarers are not/ doesn’t pay tax anywhere or file ITR anywhere in the world. Though not compulsory it is important for a seafarer to file an ITR in India for various purposes such as loan process, visa application etc.

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CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

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