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Understanding the Role of a Seafarer
A seafarer, also referred to as a mariner or sailor, works aboard ships to navigate, operate, and maintain them. Seafarers have various roles, each critical to the smooth functioning of a vessel. Their earnings primarily come in the form of salaries, which are subject to specific income tax rules in India depending on their residential status.

Income Tax Rules for Indian Seafarers

The taxability of a seafarer's income is based on their residential status, which is defined under Section 6 of the Income Tax Act, 1961. The following explains how this works:

Residential Status as per Section 6

Under Section 6 of the Income Tax Act, a seafarer’s residential status is determined by how much time they spend in India during the financial year.

1. Resident Seafarer
   A seafarer is considered a resident if they meet any of the following conditions:
• They stay in India for 182 days or more during the financial year.
• They stay in India for 60 days or more in the financial year and a total of 365 days or more in the preceding four years.
2. Non-Resident Seafarer
   A seafarer is classified as a non-resident if they spend 184 days or more (or 185 days in a leap year) outside India for employment purposes during the financial year.

Amendments under Section 6(1A) (Effective FY 2020-21)

The amendments specify that:

• A seafarer who stays in India for 120 to 181 days and has taxable income in India exceeding ₹15 lakh will be considered a resident.
• If their taxable income is less than ₹15 lakh and they stay in India for 181 days or less, they will remain a non-resident.
• Even if classified as a resident, individuals may be considered as "Not Ordinarily Resident" (NOR), meaning their foreign income will remain non-taxable.

Calculation of the Period Spent Outside India

The period spent outside India is a key factor in determining a seafarer’s residential status. The following methods are used:

1. Voyages Starting and Ending Outside India:
• The passport stamping dates are used to calculate the duration spent outside India.
• At the time of scrutiny, the dates in the Continuous Discharge Certificate (CDC) are cross-verified to confirm employment abroad.
2. Voyages Starting or Ending in India:
• The dates recorded in the CDC are used to calculate the time spent outside India.

Taxability of Salary Income

1. Resident Seafarers
• A resident seafarer's salary is taxed according to the standard provisions of the Indian Income Tax Act.
• There are no specific exemptions available for seafarers under Indian tax laws.
2. Non-Resident Seafarers
• The salary of a non-resident seafarer for services rendered on a foreign-flagged ship is not taxable in India.
• According to Section 5(2)(a) of the Income Tax Act, only income received or deemed to be received in India is taxable.
• Salary credited to a Non-Resident External (NRE) account is considered exempt as it is treated as foreign remittance.

Clarification by CBDT

The Central Board of Direct Taxes (CBDT) clarified in Circular No. 13/2017 that:

• Salary earned by a non-resident seafarer for services provided outside India on a foreign-flagged ship is not taxable in India, even if credited to an NRE account, provided the following conditions are met:
• The individual is a non-resident.
• The services are rendered outside India.
• The ship is foreign-flagged.
• The salary is credited to an NRE account.

Tax Filing Requirements for Seafarers

1. Mandatory Filing
   A non-resident seafarer must file an income tax return if their total income in India exceeds ₹2.5 lakh. Filing is also necessary if the seafarer:
• Deposits ₹1 crore or more in a current account.
• Incurred expenses exceeding ₹2 lakh on foreign travel.
• Spends over ₹1 lakh on electricity.
2. Benefits of Filing ITR
• ITR filing provides proof of income, which is helpful for loan applications, mortgages, and visa processes.
• It maintains a clean tax record and aids in handling future inquiries from the Income Tax Department.

Taxability of Other Income

1. Interest Income
• Interest earned on NRE savings accounts and NRE fixed deposits is exempt from tax under Section 10(4)(ii).
• Interest earned on Non-Resident Ordinary (NRO) accounts is taxable in India.
2. Capital Gains and Other Income
• Any income arising or accruing in India, such as rental income or gains from property sales, is taxable under Section 5(2)(b).

Conclusion

The taxation of Indian seafarers largely depends on their residential status and the source of income. Non-resident seafarers can enjoy tax exemptions on salaries earned from foreign-flagged ships if credited to NRE accounts, as long as they meet the necessary criteria outlined in the Income Tax Act and CBDT circulars.

Although filing an income tax return may not always be compulsory, it is advisable for seafarers to maintain financial transparency and take advantage of the benefits provided by a clean tax record. By adhering to the tax rules and keeping accurate documentation, seafarers can ensure they remain compliant with Indian tax laws while protecting their financial interests.

If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924. 

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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.