NRI SEAFARER TAXATION IN INDIA – TAX CONSULTANT, CA SERVICES FOR SEAFARER

Basics about Seafarer

A seafarer, sailor, mariner or seaman is a an individual person, who works aboard on a ship or watercraft. This person works as part of ship crew, and/or may also work in any one of a number of different fields that are related to the operation and maintenance of a ship. Generally, this person sails on ship as part of his employment. Generally, these individuals are Citizens of India and can be said as Non-Resident Indian (NRI) also.

How Does Seafarer Earn Income

Generally, a seafarer earns income under a contract of employment or otherwise, where the shipping company pays the seafarer on the basis of terms of the contract. Generally, this payment to seafarer happens to his Indian NRE Bank Account in foreign currency.

Taxability of Seafarer Income In India

Under Income Tax Act, 1961 (‘Act’), there is no such term as Seafarer. The Act provides the taxability based on Residential Status of Individual. Under the Act, seafarer tax liability calculation can be on the basis of residential status.

Resident Seafarer: If stay in India is for 182 days or more during a financial year then straightaway the seafarer shall be Resident in India. If so, and he is also categorized as Ordinary Resident, then global income of that person shall be taxable in India. Hence, his income from working on ship shall be taxable in India.

Non-Resident or Not Ordinary Resident Seafarer: If seafarer stay in India is less than 182 days in a financial year then he may be categorized as Non-Resident in India. Also, if on the basis of past year records, the seafarer is Not Ordinary Resident in India then his foreign income will not be taxable in India. However, in this case he need to ensure that he receives the income outside India. In this regard as per CBDT clarification income received in NRE account is considered as income received outside India.

Judicial Pronouncements

Till April 2017, there were lot of litigation and confusion wrt taxability of seafarer income received in NRE Account. In this regard, for individuals working outside the territorial waters of India, various rulings have held that if income is earned & accrued overseas then the same is not taxable in India if it received in Indian NRE Bank Account.

Central Board of Direct Taxes (CBDT) CIRCULAR No 13/2017 Dated April 11, 2017

CBDT has issued a circular no 13/2017 on April 11, 2017, where they have given certain clarifications and guidance wrt Seafarer taxation. The board clarifies that salary, of which accrual to seafarer is outside India on foreign ships, shall not be taxable in India in following cases:

  • Salary receipt is in in Non Resident External (NRE) account with an Indian Bank.
  • Accrual of salary is outside India. Salary is in relation to services on (i.e. accrual of salary)on a foreign ship.
  • The Individual, who earn above salary, is a Non-Resident in India as per the provisions of the Act.

With this circular, it is clear for seafarer that just receipt of income in NRE Bank Account will not attract tax provision of ‘Received in India’. This is a big relief for Individual Seafarer, which avoids unnecessary litigation for them.

Seafarer Taxation – Questions Still Unclear

Certain questions are still unclear or there may be a litigation wrt certain points, such as:

  • CBDT clarification seems to limit the benefit to seafarers wrt his services on a Foreign Ship. What about salary received in relation to services on Indian Ship?
  • Seafarer must receive Salary into an NRE account. What if seafarer receive salary in normal bank account in India?
  • In some cases (eg contract with an entity in India for working on foreign ship), there may be some contradiction wrt determination of Residential Status as per the provisions of section 6 of the Act viz a viz the intentions of the Circular. Here, in some case, there may be a situation when seafarer can be Resident on 60 days stay in India basis?
Frequently Asked Questions (FAQs) Wrt Seafarer Taxation in India

Q. Whether a Seafarer need to pay tax on the salary income earned by him for his services on Ship?

Ans: If a seafarer earns a salary in relation to his employment on a foreign ship, and he is a non-resident and receive his salary in NRE Bank Account in India, then as per CBDT circular (April 2017) his salary income is not taxable in India.

Q. Whether Seafarer, Mariner need to file an Income Tax Return in India, if they are Resident in India or Non-Resident in India?

Ans: Everyone, including seafarer or mariners, need to file an ITR in India if there is any income taxable in India. Filing of ITR in India has no connection with the Residential status of seafarer.

Q. How can a Seafarer open an NRE bank A/c in India? What are the documents etc requirement for Seafarer Bank A/c?

Ans: All the banks/branches, who have NRI Banking facilities, provide Seafarer Bank Account (NRE Account) facilities to mariners. On the websites of all the banks the standard and simple process is available to open seafarer (NRE) Bank account. There are some basic documents requirement for opening a Seafarer (NRE) bank account. Some of documents are valid passport copy, valid visa, continuous discharge certificate (CDC), self declaration etc.

Q: I am a searfarer. Whether new amendments, as passed through Budget 2020 wrt Residential Status, will impact my taxation in India?

Ans: Reference to present settled position (as per CBDT circular) and the condition of Rs 15 Lakh, the Budget 2020 amendments in Residential Status should not affect the Seafarer taxation. As per the final rules passed via Budget 2020, the new rules (120 days stay in India for resident category) shall be applicable to those who have taxable income in India for more than Rs 15 Lakh. Hence, seafarer should be exempted from new rule of 120 days stay and they can still fall in 182 days rule if their total income from Indian sources is less than Rs 15 Lakh. However, seafarer must consult with their CA or Tax Consultant to understand their taxation as per their facts.

Q: Whether Seafarer, Mariner need to file ITR in India? What is the due date for ITR filing in India for FY 2019-20? Can I file ITR for FY 2018-19 and earlier years now? What are the documents required for filing ITR by Seafarere?

Ans: Other than Ship Income, Seafarer may have different sources of Income in India e.g. Bank Interest Income, Mutual Fund or Shares Capital Gain, Rental Income etc. Otherwise, also, since seafarer incurs many financial transactions in India, which gets reported to IT Department directly or indirectly, it is advisable that seafarer must file an ITR in India. This also work as a tax record for them as they do not file tax return in any other country. There are various benefits of filing ITR in India, which applies to seafarer, mariner as well. General Due date for ITR filing in India for seafarer is July 31, of assessment year. However, for FY 2019-20 due date has been extended to November 30, 2020. If any seafarer has missed filing of ITR for earlier years then there is an extended time available for filing FY 2018-19 ITR till July 31, 2020. ITR for FY 2017-18 or earlier years cannot be filed, however, if there is a refund due, then an application can be submitted with specified authority for condonation and accordingly ITR can be filed for those earlier years. Documents for filing of ITR can be arranged by the Seafarer according to components of their Income. Here is a brief list of documents and processes of ITR filing, which seafarer can arrange according to their income componentsFurther to this, though their ship income may be falling out of the Indian taxation, they must keep a full record of their Ship income to counter any tax query by the Income Tax Department in India. They should also keep a clear record of their passport with India leaving and entry records.

S Lohia & Associates – CA, Tax Consultant Services For Seafarer:

S Lohia & Associates, Chartered Accountants, can be helpful for following services of NRI Seafarer:

  • Guiding & Advising in relation to setting up terms of contract for working on ship to optimize tax within the provisions of Act
  • Reviewing their ship services contract terms and advise needful changes etc
  • Determination of Residential Status Advising on receipt of income in bank account in India
  • Interpreting the legal position in relation to taxation of income from services on ship
  • Computing taxation of income from other sources in India eg Rental Income, Interest Income.
  • Advising on RBI/FEMA Regulations wrt NRE Bank Account
  • Assisting in Preparation & filing of Income Tax Return in India
  • Representing before Income Tax Authorities in relation to various litigation or notices from Income Tax Department

CA Sulabh Lohia, Bharat Kandari

Contacts

S Lohia & Associates Chartered Accountants 
Address : 1301, Naurang House (13th Floor),
21 Kasturba Gandhi Marg,
Connaught Place, New Delhi 110 001.
Tel No. : +91-11-43505250, 66095250
Tel Fax No. : +91-11-43505250
Mobile No. : 9810353219, 9910353219
Email Us: sulabhlohia@slohia.com