Taxation for Seafarers and Merchant Navy Workers in India — Services Available Across Major Cities Including Delhi NCR, Mumbai, Chennai, Kolkata, Kerala, Hyderabad, Bangalore, Gujarat, Punjab, Uttar Pradesh, and Others

Understanding Taxation for Seafarers and Merchant Navy Workers

The Income Tax Act, 1961, does not specifically mention the terms “Seafarer” or “Merchant Navy.” There are no dedicated tax provisions or exemptions under these terms. However, individuals working at sea — whether navigating ships or performing maintenance and operational roles — are taxed based on their residential status under the Act.

The key factor determining their taxability is the number of days they spend in India during a financial year. Most seafarers are Indian citizens and are classified as Resident or Non-Resident based on their duration of stay in India.

1. Resident and Ordinarily Resident (ROR)

If a seafarer spends 182 days or more in India during a financial year, they are considered Resident. If they also qualify as Ordinarily Resident, then their global income becomes taxable in India, including salary earned while working on ships.

2. Non-Resident (NR)

If the individual stays in India for less than 182 days, they are considered Non-Resident. In such cases, income earned abroad (including ship salary) is not taxable in India, provided it is received in an NRE account. This classification is further supported by the CBDT Circular issued in April 2017.

3. Not Ordinarily Resident (NOR)

Sometimes, a person may qualify as a Resident based on their current year stay but still be classified as Not Ordinarily Resident due to conditions in preceding years. In such cases, foreign income, including ship salary, may remain non-taxable in India, depending on other facts.

Impact of the 120-Day Rule Introduced in Budget 2020

Earlier, an individual was considered a resident only if they stayed in India for 182 days or more. Most seafarers plan their schedules to avoid breaching this limit.

However, Budget 2020 introduced a new rule: an Indian citizen with taxable income exceeding ₹15 lakh in India (excluding ship income) will be considered a Resident if their stay exceeds 119 days.

This 120-day rule does not apply to seafarers whose Indian income is below ₹15 lakh. Importantly, ship income is excluded from this ₹15 lakh threshold. Thus, most seafarers continue to be assessed under the 182-day rule.

Even when the 120-day condition is met and the person becomes a Resident, they may still be classified as NOR, keeping their foreign income exempt.

Receiving Salary in an NRE Account — Importance for Tax Exemption

According to income tax rules, whether income is received in India affects its taxability. The CBDT clarified that if seafarers receive salary in an NRE account, it is considered received outside India, making it non-taxable for Non-Residents.

Seafarers should open and maintain an NRE account and ensure their foreign ship salary is credited to this account.

CBDT Circular No. 13/2017 – Key Guidelines

This circular plays a crucial role in determining the taxability of income for seafarers:

• Salary must relate to services rendered on a foreign ship.

• Salary must be credited to an NRE account.

• The individual must qualify as a Non-Resident.

If these conditions are met, the salary is not taxable in India. This clarification has prevented unnecessary tax disputes and is binding on the income tax department.

Counting Days Outside India – CDC-Based Method

The CBDT Notification No. 70/2015, effective from April 1, 2015, provides guidance on how to calculate days spent outside India:

• For seafarers, the days between sign-on and sign-off dates mentioned in the Continuous Discharge Certificate (CDC) are considered as days spent outside India.

• This method supports maintaining Non-Resident status by offering clarity on eligibility.

Conclusion

Seafarers and merchant navy employees must understand how residential status and receipt of income impact their tax liability in India. Key considerations include staying within the 182-day limit (or 120-day limit where applicable), receiving salary in an NRE account, and keeping complete records like CDC entries and bank statements.

Professional assistance is advised to ensure compliance, avoid future litigation, and make full use of the available tax exemptions.

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