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Tax Guide for Seafarer

Income Tax Guide 2020 for Indian Seafarer (Merchant Navy)

Table of Contents

Meaning of Seafarer

A sailor, seaman, mariner or a seafarer is a person who navigates water bone vessels or assists as a crew member in their operation and maintenance.

Seafarer holds a variety of ranks and professions, each of which carries unique responsibilities which are integral to the successful operation of an ocean-going vessel. A common deck crew for a ship includes Captain / Master, Chief Officer/ Chief mate, Second officer/ Second mate, Able seaman, Ordinary seaman, Deck cadets etc. A common engine crew will include Chief Engineer, 2nd Engineer, 3rd Engineer, 4th Engineer (optional), Engine Cadet, Fitter, Motorman, Oiler etc. Other than this saloon staff will comprise of Chief Cook and General Stewart but the number and rank of crew members serving on a ship will vary according to the size of the vessel, trade area of the vessel, Minimum Safe Manning certificate, administration etc.

How Seafarer Earns

Seafarer generally receives remuneration in the form of salaries from the companies.

Call on 82396-85690 for income tax consultation.

Income Tax on Seafarer up to FY 2019-20

The taxability of salary received by a seafarer is based on the residential status of the seafarer.

RESIDENT SEAFARER

The salary received by a resident seafarer will be taxable as per the laws of the Income-tax department. No special exemption is available.

NON-RESIDENT SEAFARER

The salary of a non-resident seafarer will NOT be included in the total taxable income of the seafarer.

Meaning of Non-Resident Seafarer

An individual is said to be Non-Resident Seafarer if he is outside India for 184 days or more during the financial year (185 days or more in case of a leap year) for the purpose of employment. If he is not then he will be treated as a resident seafarer.

Calculation of period outside India

Rule Applicable for Voyages Start and End Outside India

Stamping dates in the passport is the basic criteria for calculation of the period outside India. Generally, passport dates are used when you join and sign off from ship outside India. However, dates of the CDC are the conclusive evidence at the time of scrutiny that you are outside India for the purpose of employment.

Rule Applicable for Voyages Start or End in India

However when you join or sign off from India then the CDC dates shall be used for calculation of period outside India.

As per Notification No. 70/2015/ F.No.142 /12/2015-TPL, the period beginning on the date entered into the Continuous Discharge Certificate (CDC) in respect of joining the ship by the individual for the eligible voyage and ending on the date entered into the Continuous Discharge Certificate in respect of signing off by that individual from the ship in respect of such voyage.

“Eligible voyage” shall mean a voyage undertaken by a ship engaged in the carriage of passengers or freight in international traffic where-

(i) for the voyage having originated from any port in India, has as its destination any port outside India; and

(ii) for the voyage having originated from any port outside India, has as its destination any port in India.

Notes:-

  1. Sum of all the period (which satisfies above conditions) should be used when there are multiple voyages in a single financial year. For example, if there are 2 voyages for a period of 100 days and 90 days during FY 2019-20 then the period outside India will be 190 Days.
  2. The period of the voyage should be calculated considering the financial year. For example, if a voyage started on 01 Dec 2019 and end on 01 May 2020 then the period outside Indian will be from 01 Dec 2019 to 31 March 2020 for the FY 2019-20 & from 01 April 2020 to 01 May 2020 for the FY 2020-21.
  3. Both the stamping date (starting and ending) will be considered as date outside India. For example, if the starting stamp date 01 April 2020 and ending stamp date is 30 April 2020 then the period outside India shall be 30 days. There are various case laws which specifically suggest that the date of departure will be considered outside India. However, for the date of arrival is also considered outside India in some of the decision of ITAT or calculation is required to be done on an hourly basis. So, it’s best if you have clear 185 days or more in your CDC.
  4. If a ship spent time in Indian territorial waters then it will be counted as period outside Indian if it is part of the eligible voyage.

Other related things:-

    1. If a person status is non-resident for one of the sources then he will be treated as a non-resident for all the sources of income.
    2. Interest earned on NRE saving bank account is exempt from Tax for all the individual.

COVID 19 Updates – A video cutting is going viral in Merchant Navy groups that the 184 days condition has been relaxed for the FY 2019-20 due to Coronavirus which is not correct. The condition for 184 days is relaxed for the Companies in India which are required to have an Indian Director as per the Companies Act 2013 not in the Income Tax Act, 1961. 

Special Circular Issued by CBDT for Non-Resident Seafarer

As per Circular No. 13/2017 issued by Central Board of Direct Taxes, salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the said salary has been credited in NRE account maintained with an Indian bank by the seafarer.

This circular specifically clarify if below conditions are met then the salary received will not be included in the total income of the individual 

    1. Non-Resident seafarer
    2. Service rendered outside India
    3. Foreign Ship
    4. Credited to NRE Bank account

However, it does not mean if you have received a salary from an Indian flagship then it is taxable as above circular is silent in this case. The above circular is just a clarification issue by CBDT for a specific condition.

IN MY OPINION, IF YOU ARE A NON RESIDENT SEAFARER THEN THE SALARY RECEIVED SHALL NOT BE INCLUDED IN YOUR TAXABLE INCOME.

Call on 82396-85690 for income tax consultation.

New Deemed Resident Provision from FY 2020-21

A new Section 6(1A) has been inserted by Financial Act 2020 which is applicable beginning from the financial year 2020-21 (01st April 2020 to 31st March 2021). As per this new section, an individual, being a citizen of India, having a total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature;

At the same time another amendment as been inserted in Section 6(6) to consider the individual covered under above section 6(1) as resident but not ordinarily resident.

The plain reading of this section suggests that all the non-resident sea fearers are considered as resident Indians and their salary will be liable to tax as they are not paying tax in any other country. However, this is not the case.

To clarify the applicability of this new section 6(1A), CBDT has issued a clarification via press release on 02 Feb 2020. As per this clarification, Section 6(1A) is an anti-abuse provision to cover those Indian citizens who shift their stay in low or no tax jurisdiction to avoid payment of tax in India. The new provision is not intended to cover those Indian citizens who are bonafide workers in other countries like in the Middle East as they are not liable to tax in these countries. Moreover, it is clarified that in case of an Indian citizen who becomes deemed resident of India under the section 6(1A), the income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession.

So, the new section does not impact taxability of salary receipt by sea fearers and they will enjoy the benefit of tax-free salary as they have currently even they become resident but not ordinarily resident as per new Section 6(1A).

Also, a false news is circulated in various places that a seafarer is required to complete 8 months onboard to save tax on their merchant navy receipt which is not correct. This provision is applicable on the person who is visiting India not for a person who is leaving India for the purpose of employment.

FAQ

Do Indian seafarers have to pay tax?

If you are outside India for more than 184 days (or 185 days in a leap year) as per your CDC/passport then you are not required to pay taxes on your merchant navy receipts.

Are seafarers NRI?

Yes, if you are outside India for more than 184 days (or 185 days in a leap year) as per your CDC/passport then you are considered Non-Resident India under Income Tax Act 1961.

Which bank is best for seafarers?

You can have NRE/NRO account in any PSU or private banks like ICICI, Kotak Mahindra Bank, SBI etc.

What is the difference between NRO and NRE account?

In NRE account only foreign currency or a check from another NRE account can be deposited. However, NRO is a saving account for non-resident in which you can deposit Indian currency or any cheque from normal saving account.

Rohit Pithisaria

I am a Chartered Accountant based in Jaipur (Rajasthan). Started TaxAdda in 2011 as a blog and now providing various service related to GST and Income Tax to the client all over India. Also writing actively for TaxAdda blog and our e-Magazine on GST & Income Tax.

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46 comments

  1. HELLO SIR,
    I AM A SEAFARER WORKING ON FOREIGN SHIPS. KINDLY INFORM ME HOW TO ACQUIRE RNOR STATUS FOR FY 2020-21. WHAT CONDITIONS NEEDS TO BE FULFILLED?

  2. Good day,
    I am a seafarer.I working on foreign going vessels in the financial year 2019 -2020 I was short of 3 days of completing my nri status., because of the nation wide lockdown.
    Govt has announced certain relaxation for maintaining the NRI status. Kindly clarify I am eligible to any such relaxations.

    • Rohit Pithisaria
      Rohit Pithisaria

      Were you in India during the period 23rd March to 31st March? If so then you can claim this relaxation otherwise you will be considered as resident (or RNOR).

  3. Good day,for the last financial year 2019-2020 I completed my nri status.From January 2020 to April 2020 I don’t go for ship ,is it possible for me to open PPF account?

  4. Sir, I am a seafarer and I have no overseas address and no permanent visa. We are travelling with seamen transit visa to different countries each time to join the ship and back to home after sign off. So how can I open a non resident trading & demat account? We are allowed to open NRE A/C either with foreign address or with resident home address.

    • Rohit Pithisaria
      Rohit Pithisaria

      You have to consult the broker to find out the applicable docs. You can submit your ITR or passport for proof your non-resident status.

  5. I am a seafarer. Can I use my NRO a/c to transfer money to my trading and demat account with the broker for share market transactions? I have a resident trading & demat account.

    • Rohit Pithisaria
      Rohit Pithisaria

      You are not allowed to have resident trading and demat account You are required to declare your correct resident status to your share broker. Yes, you can use your NRO account to transfer money to your trading account.

  6. In one of the above reply saying that a non resident seafarer can open only NRE and NRO account. In another reply you are saying that we can transfer money from NRE A/C to resident savings A/C. My question is whether a NR seafarer can open and maintain a resident savings account or not. Or he can open only NRE and NRO account only.

  7. So the salary of an Indian seafarer working in a foreign company ship for more than 184 days in a financial year is still tax free? It has not been changed to 240 days(8 months)?

    Also can an Indian Seafarer working outside India for more than 184 days have a PPF and Savings Account?

    • Rohit Pithisaria
      Rohit Pithisaria

      Yes, the old provisions are still same for the seafarer. The provision of 240 days are not applicable to you.
      You cannot open a normal saving account. You are allowed to have only NRE and NRO bank accounts. You are also not allowed to have a PPF account when your status is Non-Resident.

      • So what if a seafarer already had a savings and ppf account from before having nri status?

        • Rohit Pithisaria
          Rohit Pithisaria

          You are required to close the saving account but you can continue the PPF account till the restrictions applicable to PPF account.

  8. Muraleedharan

    I understand that as per latest Govt. guidelines, a person had to be abroad for 240 days to claim NRI status.Any relaxation for Merchant Navy employees,?

    • Rohit Pithisaria
      Rohit Agarwal

      Bonafide workers will be covered in the old provision. This provision is applicable to the person who is using the benefit of this section to save their taxes. More clarification is pending from the ministry on this section for sea farers.

  9. I’m from Tamilnadu . Can u help to file return here and if I start filing return is it mandatory to do every year ? As I’m investing in mutual funds through NRE account , is it comes under LTCG tax ?

    • Rohit Pithisaria
      Rohit Agarwal

      Yes, we can help you with the tax filing. Please call us or email us anytime. It is not mandatory to file a return every year if you did one time but we strongly suggest to do it even all of your income is tax-free. The reason being the IT department have the details regarding the salary which you receiving in NRE, NRO account along with all the investments, loans etc. However, you are not filing the return so your residential status is not available with the department which may raise alarm for scrutiny or notice to you for filing the return. Yes, all the mutual fund’s gains are subject to Section 112A which is taxable @ 10% above Rs 1,00,000 per financial year.

  10. VIGNESH NARAYANASAMY

    Good day,I am a seafarer working in foreign flag ships.As current corona pandemic is going on due to this reason I am not able to join ship and cant complete my nre days this FY…i am in short of 7 days to complete my nre days..is there any option available to avoid paying tax….I dont have any business or income in india.. Also advice which itr form I have to use for filling itr 1 or itr 2

  11. Would you help on filling of ITR? If yes what are your charges.

    • Rohit Pithisaria
      Rohit Agarwal

      Yes, we are accepting the return. Our charge is Rs 2,499. We have sent you an email as well.

  12. Inderjit Singh

    Good day, I have quite sailing since last year, I have NRE account, can I open normal saving account and transfer my funds in this account. Also what will be tax liability?

    • Rohit Pithisaria

      Yes, you can open the normal saving account if you are a resident and transfer the funds to your new account. There is no tax liability on transferring of funds from you NRE bank account to normal resident saving account.

  13. Krishikesh sarvankar

    Hello Mr. Rohit am a chef in cruise lines based in USA which carriers Panama flag my sign on and sign off is out for India and mostly I spend 34weeks (236 days approx) out of India I do have a NRE bank account here and I am resident of Maharashtra and do have a CDC book do I need to make a ITR and some years before it was not compulsory for cruise ship seafarers we make a cdc but now it is compulsory so I don’t have the dates marked on my CDC book but I do have it on my passport. I question is do I need to make ITR if yes then will the dates(sign on and sign off) on my passport will help me instead of CDC.

    • Rohit Pithisaria

      CDC is conclusive evidence for working on a ship so it is better to have the proper stamps on CDC for sign in and sign off. We suggest you to file your ITR every year. Yes, the stamps on the passport will definitely help you to prove your status as Non-Resident.

  14. If i m sailing for more then 185 days outside India, and my salary is deposited in a saveing account, in such a case m i eligible to pay tax?

    • Rohit Pithisaria

      No, tax is not applicable even you receive money in your normal saving account but you should use only NRE account for salary receipts to save yourself from any income tax scrutiny.

  15. Santosh kumar

    I’m seafarers working on foreign ship,,,I want home loan from bank,,,bank demand income tax return receipt,,,,what I have to do ,,please advice

    • Rohit Pithisaria

      You can only file the return for the FY 2018-19. Generally, bank requires last 3 ITR for loan processing.

  16. What is tax implication on seafarer working on foreign vessel continuously plying in Indian coast. Foreign vessel got converted to coastal vessel to get HPCL Charter for 6 months.

  17. Melwyn Dsouza

    I am working offshore, earlier I was stationed in one location Qatar and I was able to complete my NRE days. Now I still can manage to complete the 184-185 days mark but revolved on installations including in Indian waters. Do working in Indian waters makes me eligible for taxation or am I exempted when I complete the 184-185 days mark. Note my salary is coming from UAE office into my NRE account.

    • Rohit Pithisaria

      Have you boarded and signed off from the ship from India coast? If not then you can shows yourself an NR.

  18. If the sea carer is outside the country for 177 days instead of 184 due to health reasons is he still required to pay tax for that financial year?

    • Rohit Pithisaria

      Yes, you will be considered as Indian Resident for the purpose of Income Tax and have to pay tax.

  19. What about seafarer’s working on foreign flag ships where the Voyage does not begin or terminate in any Indian Port ? The Voyage is then not eligible for Indian CDC status. Will in this case passport stamp be considered to calculate NRI days ?
    What happens when a Seafarer goes abroad for official work ? Visiting office? Attending courses etc ? Can we calculate those days in NRI status ?

    • Rohit Pithisaria

      CDC dates should be considered for calculating days out of India even on foreign flagships as it is conclusive proof of working on ships. If you are out of India for other purposes like visiting the office, attending courses etc. then it can be challenged by your Assessing Officer at the time of scrutiny.

  20. If I have completed NRE time as per CDC on Indian Flagship who deducted TDS us 194J…will my professional income will be taxable…as I am crew of an Indian ship and completed my NRE seatime by means of eligible voyage..

    • Rohit Pithisaria

      No, if you have completed NRE status then the income will be tax-free and you can claim complete amount as refund.

  21. AJIT AGAWEKAR

    Which ITR form to be filled for FY 18-19 for NRI seafarer who have only income from other sources- interests from FDs/ LIC annuity/and
    MIS interests….

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