NRI gets special treatment whether it is a family function, among school friends, a bank, or for matrimony. But do we seafarers really NRIs? I hope this article will clear out some doubts hovering over this question mark.
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Seafarers equals NRI?
First of all, there is NO such term as ‘Seafarer’ or ‘Merchant Navy Crew’ under the Income Tax Act, of 1961. The same goes for the provision of exemption or taxation under the Income Tax Act for ‘Seafarer’ or ‘Merchant Navy Crew’. The Residential Status of an Individual determines his taxability in ITA India, whether he is a Seafarer or Merchant Navy Crew or any other matter of fact.
A seafarer’s tax liability is calculated on the basis of his residential status (based on the number of days they stay in India)
First, let us look at some definitions which will be handy, and then we can steer ahead.
Financial Year: Until today, FY in India is a duration from 1st April of the said year to 31st March of the year next to the said year. For example, FY 2022-23 will be from 01/04/2022 – 31/03/2023.
Resident seafarer: A seafarer who has stayed for 182 days or more during a financial year.
Non Resident seafarer: A seafarer who has stayed less than 182 days during a financial year.
So, if we talk in terms of days spent at sea or the “seatime”, a seafarer has to be onboard for 184 days or 185 days when the year is a leap year.
But how the number of days is calculated because it is not necessary that your departure date leaving India, be the same as the CDC “Sign On” date or the “Sign Off” date be the same as your arrival in India. There is a blurred line here, as the days are counted considering the employment tenure. Let’s consider a case here that you have signed off the ship with 174 days booked in your CDC now you want to complete the 10 remaining days chilling off in Pattaya, that won’t work my friend. Remember days “under employment“.
To be safe & sure, have a boring sail of 185 days on your CDC and enjoy being NRI.
What if you miss on your sea time?
There is a further sub-division to the RESIDENT SEAFARER criteria.
Resident and Ordinary Resident (R&OR): This status is applied if
- A Seafarer stays in India for more than 182 days in an FY AND
- (a). A Seafarer is a Resident Indian in at least 2 FY’s out of the preceding 10 FY’s OR (b). A Seafarer stays in India for more than 729 days in the preceding 7 FY’s
All the income earned, whether in India or outside India WILL BE TAXABLE.
Resident and Non-Ordinary Resident (R&NOR): This status is applied if
- A seafarer stays in India for more than 182 days in an FY AND
- (a)A Seafarer is a Non-Resident Indian (NRI) in any 9 FY’s out of the preceding 10 FY’s (b)OR A Seafarer stays in India for less than or equal to 729 days in the preceding 10 FY’s.
The income earned outside India i.e your salary is NOT TAXABLE. (income earned from outside India is taxable if the business from which the income is earned comes under Indian jurisdiction).
So, if you have the R&NOR status, you won’t be liable to pay taxes on the income earned from sailing on a foreign ship.
Also Read
NRE/NRO account – Everything a seafarer should know
Budget 2020 New Residential rule
Budget 2020, has introduced new provisions in the Residential Status Guidelines. Now, a seafarer can be categorized as a Resident of India if his stay in India exceeds 119 days (i.e. 120 days or more) in a financial year.
There is a condition to this rule. The new rule of 120 days rule is applicable to those whose Total Taxable Income in India exceeds Rs 15 Lakh. Most of the seafarers do not have an Indian Income source that exceeds Rs 15 Lakh. Hence, seafarers are still eligible to be determined as per 182 days Residency rule and 120 days rule will not apply to them. Here it is important to note that for the purposes of calculation of Rs 15 Lakh, their ship income will not be included.
Further, even if a seafarer qualifies the 120 days clause (on the basis of his income in India exceeding Rupees 15 Lakh), and is categorized as Resident in India, as per the new NOR Rules he will be categorized as Non-Ordinary Resident (R&NOR) in that financial year.
Should seafarers file an ITR?
Seafarers are Indian citizens at last. Their status grants their onboard income not taxable. But their citizenship, permanent house, family, and other reasons, everything is linked and lies in India. Their financial transactions in India may get reported to Income Tax Authorities. Hence, even though the seafarer does not have any taxable income in India or their income is less than the taxable limit they must file an ITR in India. Also, an ITR record helps seafarer to respond to any future inquiry by Tax Department.
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