Seafarers, including Merchant Navy officers, are individuals employed on ships or marine vessels. They usually work under contract for navigation, maintenance, or operational duties at sea.

How Does Income Tax Filing Work for Seafarers?

Income tax for seafarers is mainly based on their residential status under the Income Tax Act, 1961. Here’s how it is determined:

• Resident and Ordinarily Resident (ROR):
  If a seafarer stays in India for 182 days or more in a financial year, they are treated as a resident. In this case, global income, including income earned on ships, is taxable in India.

• Non-Resident (NR):
  If the stay in India is less than 182 days, then only the income earned or received in India is taxable. Ship income earned outside India is not taxed in India.

• Resident but Not Ordinarily Resident (NOR):
  In certain cases, a seafarer may qualify as NOR. Here, foreign income may be exempt, depending on the source and conditions.

Understanding your residential status is crucial for correct ITR filing and avoiding unnecessary tax liability.

Impact of the New 120-Day Rule for Seafarers

The Finance Act 2020 introduced a new provision under the Income Tax Act affecting Indian citizens with significant Indian income. As per the updated rule:

• If a seafarer’s Indian taxable income is less than ₹15 lakh, the 182-day residency rule remains applicable.

• If the taxable income exceeds ₹15 lakh (excluding ship income), the 120-day rule may apply. In such cases, the individual may be classified as a Resident but Not Ordinarily Resident (NOR). This status generally keeps foreign ship income exempt from Indian taxation.

CBDT Circular 13/2017: Important Relief for Seafarers

As per CBDT Circular No. 13/2017, any salary received by a seafarer for services rendered on a foreign ship and credited to an NRE account is treated as received outside India. Hence, such income is not taxable in India.

Note: Ensure your seafarer salary is directly deposited into your NRE bank account to avail of this exemption.

Residential Status & Voyage Days – Rule 126

Determining the number of days outside India is critical for tax status. This is calculated based on the Continuous Discharge Certificate (CDC).

• The period between sign-on and sign-off during a qualified voyage is considered outside India.

• This helps accurately assess your residential status under the Income Tax Act.

Proper documentation and calculation of voyage days are essential to determine your tax liability and eligibility for exemptions.

Bank Accounts for Seafarers

Seafarers qualifying as Non-Resident (NR) under the Income Tax Act should maintain only the following types of accounts in India:

• Non-Resident External (NRE) Account

• Non-Resident Ordinary (NRO) Account

These accounts help ensure compliance with FEMA regulations and smooth handling of foreign income and remittances.

Why File an Income Tax Return Even If Income is Exempt?

Even if your ship income is exempt, filing an Income Tax Return (ITR) is highly recommended for the following reasons:

• Acts as a proof of income and financial credibility

• Required for visa processing and loan applications

• Ensures transparency and keeps you compliant in case of future scrutiny by the Income Tax Department

Reporting exempt income is mandatory. This includes:

• Foreign ship salary credited to an NRE account (to be shown under Exempt Income)

• Interest earned on NRE account, which is exempt under Section 10(4)(ii)

Taxable Income to Declare

In addition to exempt income, seafarers must report the following if applicable:

• Capital Gains

• Rental Income from property in India

• Dividends from Indian investments

These incomes are taxable and must be disclosed under the relevant heads in your ITR.

Importance of Record Maintenance

Seafarers should maintain proper documentation such as:

• CDC copies (sign-on/sign-off pages)

• NRE/NRO bank statements

• Investment summaries

• Supporting documents for Indian income

Proper records are essential, especially when claiming significant exemptions, as it reduces the risk of future notices or queries from the Income Tax Department.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.