Seafarers, Merchant Navy Workers Taxation In India – Services In All Major Cities In India i.e. Delhi NCR, Mumbai, Kolkata, Chennai, Kerala, Hyderabad, Bangalore, Gujarat, Punjab, UP, Other Cities
What is Taxation of Seafarer or Merchant Navy Worker?
- Firstly, there is no such term as ‘Seafarer’ or ‘Merchant Navy’ under the Income Tax Act, 1961 (‘Act’). There is no specific provision of exemption or taxation under Income Tax Act for ‘Seafarer’ or ‘Merchant Navy’.
- In general terms, a Seafarer or Merchant Navy Worker is someone who works or travels on a boat or ship on the sea. Seafarer navigates a sea vessel or assist as a crew member in the operation and/or maintenance of Ship as part of his contractual employment.
- The Income Tax Act of India, provides the taxability based on Residential Status of an Individual whether the same is Seafarer or Merchant Navy Worker or any other. Hence, a seafarer’s tax liability is calculated on the basis of his residential status.
- Generally, seafarers (or merchant navy workers) are Citizens of India, and based on their number of days stay in India, are classified as Non-Resident or NRI.
Resident & Ordinary Resident (ROR) Seafarer – Global Income May Be Taxable in India
Like any other individual, if a seafarer spends 182 days or more in India during a financial year, they are treated as a Resident under Indian tax laws. If they also qualify as an Ordinary Resident, their global income becomes taxable in India. This means that for a seafarer classified as a Resident & Ordinary Resident (ROR), earnings from employment on a ship will be taxable in India. However, the exact taxability may depend on additional factors and circumstances.
Non-Resident Seafarer (NR)
If a seafarer stays in India for fewer than 182 days in a financial year, they are considered a Non-Resident. In such cases, their foreign income — including income earned from working on a foreign vessel — is not taxable in India. As per the CBDT circular issued in April 2017, this income must be credited to an NRE account to claim the exemption.
Not Ordinarily Resident Seafarer (NOR)
In certain situations, a seafarer may stay in India for more than 181 days in a financial year and still qualify as a Not Ordinarily Resident (NOR) based on their stay in earlier years. In this category, depending on specific facts and circumstances, their foreign income — including ship income — may remain exempt from tax in India.
Budget 2020 – New 120-Day Residential Rule in India and Its Tax Impact on Ship Workers, Seafarers, and Merchant Navy Employees
Under the earlier rules, an individual, including ship workers, was considered a Resident in India if they spent 182 days or more in the country during a financial year. Typically, seafarers planned their sailing schedules to remain at sea for at least 185 days, which meant they often spent 4–6 months in India but stayed below the 182-day threshold. In many cases, they would remain in India for over 120 days to take a break from sailing and spend time with family.
Budget 2020 brought significant changes to the residential status guidelines. Now, any Indian citizen, including ship workers, can be classified as a Resident in India if they stay in the country for 120 days or more in a financial year. This rule could potentially change the tax liability for merchant navy employees and seafarers if they fall under this new residency criterion.
However, there is an important exception. As per the final law passed by Parliament, the 120-day rule applies only to individuals whose total taxable income in India exceeds ₹15 lakh. For most seafarers and merchant navy employees, taxable income in India does not cross this limit, meaning they continue to be assessed under the 182-day residency rule. It is crucial to note that ship income is excluded when calculating the ₹15 lakh threshold.
Even if a seafarer meets the 120-day condition due to taxable income in India exceeding ₹15 lakh, they would generally be classified as a Not Ordinarily Resident (NOR) under the new rules, keeping certain foreign income exempt from Indian taxation.
In summary, the new 120-day residential rule has limited impact on ship workers, seafarers, and merchant navy employees. Nevertheless, professional advice should be sought based on individual circumstances to avoid potential tax disputes.
Receipt of Income Outside India vs Taxability – Seafarer NRE Bank Account
Under the Income Tax Act, taxability in India also depends on whether the income is received in India. Therefore, apart from determining residential status, it is important to ensure that income is considered received outside India to avoid taxation.
According to CBDT’s clarification for seafarers and merchant navy employees, income deposited into an NRE bank account is treated as income received outside India. This means seafarers, mariners, and merchant navy workers can open an NRE account in India and have their salary from ship employment credited there to claim tax exemption under the Income Tax Act.
CBDT Circular No. 13/2017 – Issued April 11, 2017
This circular is a key reference in determining the taxability of income earned by seafarers, merchant navy employees, and others working on ships. It states that salary earned for services on a ship, accrued outside India, is not taxable in India if certain conditions are met:
- The salary is accrued/earned outside India.
- The salary relates to services performed on a foreign ship.
- The salary is credited to a Non-Resident External (NRE) bank account in India. Salary received in any other account will not qualify for this exemption.
- The individual is classified as a Non-Resident under the provisions of the Income Tax Act.
The circular confirms that crediting salary to an NRE account will not be considered as income “received in India,” providing significant relief to NRI seafarers and reducing unnecessary disputes with the tax department. While binding on the tax authorities, seafarers may still seek additional benefits under other provisions of law or court rulings.
Computation of Number of Days – CBDT Notification No. 70/2015 (Dated August 17, 2015)
The calculation of days spent outside India for ship workers has often been a matter of contention. The CBDT, through the Income-tax (Twelfth Amendment) Rules, 2015 (effective April 1, 2015), clarified this process.
For voyages between an Indian port and a foreign port, the count of days outside India will start from the sign-on date recorded in the Continuous Discharge Certificate (CDC) and end on the sign-off date in the CDC. This method benefits seafarers by helping them maintain Non-Resident status for tax purposes.
Frequently Asked Questions (FAQs) on Seafarer Taxation in India
Q. Is it mandatory for a seafarer to file an Income Tax Return in India if there is little or no income in India apart from ship earnings?
No, it is not mandatory under Indian Income Tax laws if the seafarer has no taxable income in India. However, filing an ITR is strongly recommended. It serves as proof of income, supports applications for loans or visas, and acts as evidence in case of any future queries from the Income Tax Department.
Q. What is the due date for filing a seafarer’s Income Tax Return in India? Can a belated return be filed? Can previous years’ returns be submitted?
The due date for filing ITR for seafarers, like any other salaried individual, is 31st July of the assessment year. For example, for FY 2019–20, the due date was extended to 10th January 2021, and belated returns could be filed up to 31st March 2021. If a seafarer wishes to file for earlier years, it can only be done after obtaining approval from the Commissioner of Income Tax and meeting certain conditions.
Q. Who is required to pay income tax in India?
Any individual, group, or legal entity earning income during a financial year is liable to pay tax. The Income Tax Act recognises the following categories: Individuals, Hindu Undivided Families (HUF), Associations of Persons (AOP), Bodies of Individuals (BOI), Firms, Companies, Local Authorities, and Artificial Juridical Persons.
Q. How is a merchant navy employee or seafarer taxed in India? What relief does the CBDT Circular provide?
If a seafarer works on a foreign ship, is a non-resident, and receives their salary in an NRE bank account in India, the salary is not taxable in India. This exemption is granted under CBDT Circular No. 13 (April 2017).
Q. What is the new 120-day residency rule and how does it affect seafarers?
As per Budget 2020, an Indian citizen can be classified as a resident if they stay in India for 120 days or more during a financial year, provided their Indian-sourced income (excluding foreign ship salary) exceeds ₹15 lakh. Most seafarers do not meet this income threshold, so they are generally unaffected. However, it is advisable for seafarers to plan their stay and income carefully and consult a tax advisor annually.
Q. What documents are required for filing a seafarer’s ITR? Is NRE account interest taxable?
Seafarers must maintain bank statements, investment reports (mutual funds, shares), and other relevant documents. Common sources of taxable income in India include interest from resident bank accounts, rental income, capital gains, and dividends.
Interest earned on an NRE account is exempt under Section 10(4)(ii), provided the individual is a non-resident and eligible to maintain the account under RBI rules. The exempt interest must still be reported in the ITR under “Exempt Income.”
Q. What records should seafarers keep regarding ship income?
Seafarers should keep:
- Passport copies
- Ship employment contracts
- NRE bank statements
- Emails with the employer
- CDC (Continuous Discharge Certificate) details
These records help in proving eligibility for exemption under CBDT Circular No. 13 (April 2017).
Q. Was there any COVID-19-related tax relief for seafarers?
Yes. For FY 2019–20, CBDT Circular No. 11/2020 stated that if an individual arrived in India before 22 March 2020 and could not leave, the period from 22 March to 31 March 2020 (10 days) would not be counted towards their stay in India. Quarantine periods were also excluded.
For FY 2020–21, no exemption was officially announced, though relief was anticipated due to the pandemic.
Q. Why should seafarers file an ITR in India?
Even if ship income is not taxable in India, filing ITR helps maintain official income records, facilitates financial transactions, and avoids future disputes. It also supports visa processing, loan approvals, and provides evidence of compliance with tax laws.
NRI Tax Services for Seafarers
Professional tax services for seafarers include:
- Filing Income Tax Returns
- Tax law interpretation and compliance
- Reviewing and structuring ship employment contracts
- Planning and determining residential status
- Advising on RBI/FEMA compliance for NRE accounts
- Representation in tax litigation matters
