Merchant Navy Workers Taxation in India

Similar to other Indian citizens, seafarers or merchant navy professionals are governed by Indian income tax laws. However, their tax liability primarily depends on their residential status, which is decided based on the number of days they stay in India during a financial year.

Being bordered by seas on three sides, India has greatly benefited from the maritime sector, which has significantly supported economic development. This industry plays a key role in international trade, and Indian seafarers or merchant navy personnel are an integral part of it, ensuring the efficient transportation of goods across global waters.

Despite navigating vast oceans and managing the demanding nature of a seafaring career, it is equally important for individuals in this profession to clearly understand the intricate income tax* regulations applicable in India.

This article acts as a detailed guide for merchant navy professionals and aspiring seafarers to gain clarity on taxation rules relevant to their field.

It explains key aspects of income tax applicable to seafarers, such as tax rates, available exemptions, and compliance requirements linked to the distinct nature of their profession. 

Who Are Merchant Navy Workers?

Merchant navy workers, commonly referred to as seafarers, mariners, or sailors, are trained professionals engaged in the operation and upkeep of sea-going vessels. These vessels may be used for commercial transportation, tourism, or national security purposes. Seafarers include personnel from various ranks and specialisations who work together to ensure the vessel travels safely and efficiently between ports.

Outlined below are the key roles and responsibilities that fall under merchant navy workers:

Ship’s Deck Department

The deck department is headed by the Captain, the senior-most officer on board, who holds overall responsibility for the vessel’s safety, navigation, and operations. The Captain makes important decisions, supervises the crew, and ensures adherence to maritime regulations.

Supporting the Captain are navigational officers and deck cadets, including the Chief Officer and Second Officer. Their duties involve navigation, communication, and implementation of safety measures. They assist in route planning, hazard avoidance, and maintaining navigational records.

Engine Department

The engine department is led by the Chief Engineer, who oversees the ship’s propulsion system and ensures optimal engine performance.

Assisting the Chief Engineer are engineering officers and engine cadets responsible for operating and maintaining the ship’s machinery. This group includes Second and Third Engineers, as well as roles such as Motorman, Fitter, and Oiler, all of whom ensure smooth and safe mechanical functioning.

Catering Department

The catering department focuses on the welfare of crew members and passengers by providing timely and hygienic meals. This department generally consists of a Chief Cook and a General Steward.

The number of crew members and their respective ranks on a vessel can differ depending on the ship’s size, purpose, and trade route.

Taxation of Merchant Navy Workers

The Income Tax Act, 1961, does not specifically define the terms “seafarer” or “merchant navy.” As a result, there are no separate provisions within the Act that provide special tax treatment or exemptions exclusively for merchant navy personnel. Therefore, the standard income tax provisions applicable to Indian citizens are also applicable to seafarers.

In general, taxation for Indian citizens—including merchant navy workers—is based on their residential status, which is determined by the number of days spent in India during a financial year.

Accordingly, a seafarer’s tax obligation depends on whether they are treated as a resident Indian or a Non-Resident Indian (NRI).

Criteria for Determining Tax Residency Status

Under Section 6 of the Income Tax Act, individuals are classified into three categories based on their residential status for tax purposes: Resident and Ordinary Resident (ROR), Non-Resident Indian (NRI), and Resident but Not Ordinary Resident (RNOR). The conditions used to determine an individual’s tax residency are explained below:

Resident and Ordinary Resident (ROR) Seafarers

A seafarer is considered a Resident and Ordinary Resident (ROR) in India if any one of the following conditions is fulfilled:

• They have stayed in India for at least 182 days during the relevant financial year.
• They have stayed in India for a minimum of 60 days in the relevant financial year and at least 365 days in total during the four financial years immediately preceding it.
• If their annual taxable income exceeds ₹15 lakhs, they must have stayed in India for at least 120 days during the relevant financial year.

For ROR seafarers, income earned both in India and outside India is subject to tax under the Income Tax Act. Additionally, any supplementary income earned while working on a ship is also taxable in India. Such individuals are eligible to claim deductions and exemptions available to resident taxpayers under various provisions of the Act.

Non-Resident Indian (NRI) Seafarers

Seafarers who are Indian citizens but do not satisfy any of the conditions prescribed for resident status are treated as Non-Resident Indian (NRI) seafarers. In these cases, income earned from foreign sources, including additional income from services performed on a foreign ship, is not taxable in India.

However, income earned in India by NRI seafarers is taxable under Section 195 of the Income Tax Act. As per the CBDT circular issued in April 2017, such income must be credited to either a Non-Resident External (NRE) account or a Non-Resident Ordinary (NRO) account.

Resident but Not Ordinary Resident (RNOR) Seafarers

In some situations, seafarers may qualify as Indian residents because their stay in India exceeds 182 days. Despite this, based on their residential history in earlier years, they may still be classified as Resident but Not Ordinary Residents (RNORs). In such cases as well, income earned from foreign sources, including any additional income from services provided on a foreign ship, is not taxable in India.

Tax Rates for Different Types of Income

The income earned by merchant navy workers is generally divided into two categories—income sourced from India and income earned abroad. The applicable tax rates for merchant navy personnel may differ depending on the nature and source of income.

Taxation of Indian Income

Income earned in India by merchant navy workers is taxed in line with the standard income tax provisions applicable to Indian residents. This means such income is taxable according to the applicable income tax slab rates after allowing eligible deductions and exemptions.

Indian income for merchant navy professionals may include salary income, rental income, interest earnings, and income from other sources.

For NRI seafarers, tax rates on Indian income may vary if they are covered under Double Tax Avoidance Agreements (DTAAs). These agreements are entered into by India with several countries to ensure that the same income is not taxed twice—once in India and again in the country of residence.

Taxation of Foreign Income

For Resident and Ordinary Resident (ROR) seafarers, income earned outside India is taxable in India. In contrast, foreign income earned by Non-Resident Indian (NRI) or Resident but Not Ordinary Resident (RNOR) seafarers is not subject to tax in India. Due to the complexity of these provisions, seeking expert guidance is advisable.

Income Tax Exemptions Available to Seafarers in India

As discussed earlier, ROR merchant navy workers are entitled to claim deductions and exemptions similar to those available to other resident taxpayers. These include:

• If a seafarer lives in rented accommodation and receives House Rent Allowance (HRA) as part of their salary, it can be claimed as a deduction under Section 10(13A) of the Income Tax Act.
• Under Section 10(26), income earned for services provided outside India may be claimed as exempt.
• Nautical Miles Allowance (NMA) received from the employer can be claimed as a deduction under Section 10(14).
• Deductions under Sections 80C, 80D, and 80G are available for investments and expenses such as life and health insurance premiums, charitable contributions, National Pension Scheme (NPS), and Public Provident Fund (PPF).
• Seafarers can also claim a standard deduction on a specified portion of their salary, generally up to 30%, to account for employment-related expenses.

Income Tax Filing for Seafarers

Under the Income Tax Act, seafarers or merchant navy personnel are not mandatorily required to file Income Tax Returns (ITRs). However, even though filing is not compulsory, it is highly advisable and beneficial for seafarers to file their returns in India.

Filing an ITR voluntarily offers multiple advantages, such as serving as valid income proof for purposes like loan approvals and visa applications. It also helps avoid possible complications or inquiries from the Income Tax Department at a later stage.

Conclusion

Having a clear understanding of income tax provisions is crucial for merchant navy professionals and individuals planning to pursue a career in this sector. Awareness of residential status, tax responsibilities, and related compliance requirements enables seafarers to manage taxation matters with confidence.

Moreover, being familiar with the income tax filing procedures applicable to NRIs can help prevent future legal or financial difficulties.

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