As per Section 6 of Income Tax Act, 1961, a Seafarer shall be Non-resident if he stays outside India for a period of 184 days or more (185 days or more in case of leap year) for the purpose of employment.
Calculation of period outside India
As per Notification No. 70/2015/ F.No.142 /12/2015-TPL, period beginning on the date entered into the CDC in respect of joining the ship by the individual for the eligible voyage and ending on the date entered into the CDC in respect of signing off by that individual from the ship in respect of such voyage should be considered as period outside India.
“Eligible voyage” shall mean a voyage undertaken by a ship engaged in the carriage of passengers or freight in international traffic where-
(i) for the voyage having originated from any port in India, has its destination at any port outside India; and
(ii) for the voyage having originated from any port outside India, has its destination at any port in India.
Exemption of Salary received by Non-Resident Seafarer in his NRE account
Salary received by Non-Resident seafarer in his NRE account for services rendered outside India on a ship is exempt from tax.
Filing of Return of Income
A Non-resident seafarer is required to file Income tax Return when his total income before claiming any deductions (like LIC, Mediclaim etc.) exceeds Rs 2.5 lacs.
Also, return is required to file by the seafarer, if he has a) Deposited amount of Rs.1 crore in current accounts b) Incurred expenditure of more than 2 lakhs for any travel to foreign country c) Incurred expenditure of more than 1 lakhs towards consumption of electricity
Frequently Asked Questions (FAQ)
1) I have stayed outside India for a period of 210 days. Whether the salary received shall be taxable in India?
The salary shall be tax free since the seafarer becomes a non-resident as he has stayed outside India for 184 days or more (185 days or more in case of leap year)
2) I have joined ship from India on 23rd May 2019 and the signing off is in USA on 26th January 2019. Both the dates are mentioned in CDC. Should I use my passport dates or CDC dates for calculating the period outside India?
The period outside India shall be from 23rd May 2019 to 26th January 2019 i.e. CDC dates.
3) I have left India on 17th May 2019, but the actual joining from Singapore as mentioned in CDC is 23rd May 2019. There can be two possibilities.
a) The sign off is in Indian port in Cochin on 25th Dec 2019 as mentioned in CDC
As per Notification No 70/2015/ F.No.142 /12/2015-TPL, the date of period outside India shall be calculated from 23rd May 2019 to 25th Dec 2019 and not from 17th May 2019 since the sign on is from Singapore and sign off is in India.
b) The sign off is in USA on 25th Dec 2019 as mentioned in CDC.
The period outside India shall be calculated from 17th May 2019 to 25th Dec 2019 since the sign on is from Singapore and sign off is in USA.
4) If there is shortfall of 10 days in maintaining his Non-Resident Status, then can I go out for a vacation to complete the Non-resident status?
No, it has to be only for the purpose of employment and not for vacation.
5) I have signed on from India on 23rd May 2019 and signed off in Australia on 20th Dec 2019. But I am staying in Australia for 10 days till 30th December 2019 to explore Australia for a vacation. From which date will the period outside India shall be calculated?
The period outside India shall be calculated from 23rd May 2019 to 20th Dec 2019 and not from 23rd May 2019 to 30th December 2019 since the 10 days are for vacation and not for employment.
6) Whether Salary received by Non-Resident seafarer in NRO account is exempt from tax?
The salary will be exempt from tax even if received in NRO account. But it is advisable to receive the salary in NRE account to avoid litigations.
7) I have completed non-resident status but TDS is deducted on the salary received. Hence whether the same is taxable in India?
Not Taxable, but you can claim refund by filing income tax return in India.
8) I am a non-resident seafarer and I have got an advance of $5000 at the time of sign off. Whether the same is taxable?
Normally cash advance is a part of salary and therefore it is taxable. But since you are a non- resident seafarer, the same will not be taxable if you deposit in NRE Account.
9) I am a non- resident seafarer. What if I have not filed my return of income?
Normally, the amount received by a Non-Resident Seafarer in his NRE account is not taxable. However, still it is advisable to Income Tax Return because of the following reasons
a) To claim refund of TDS. b) To apply for housing loans or any other loan. c) While purchasing property it is mandatory to submit PAN and hence if you do not file your Income Tax Return, the Income Tax Department can question the sources of income from where the property has been purchased.
d) Incurred expenditure of more than INR 2 lakh for any travel to foreign country. e) Incurred expenditure of more than INR 1 lakh towards consumption of electricity. f) Deposited amount of INR.1 crore in Bank Account.
10) I am unable to complete my non-resident status for the financial year 2019-20. What if I can take most of my salary as cash on the ship rather than sending it in my bank account to save tax?
You are required to report your total salary as income rather than the amount transferred into your bank account against salary. In case, if the filed return get selected for scrutiny, you have to provide the salary slips, signed contract etc. to validate the deposit into your bank account.
11) When should I file income tax return for FY 2019-20?
The return shall be filed on or before 30th November,2020 but after 1st April 2020.
12) Whether the due date for filing return for FY 2018-19 has been extended in the view of COVID 19?
Yes, you can file return upto 30th June 2020 after paying certain amount of penalty.
13) Whether the amendment in Budget 2020 is applicable to seafarers?
The amendment in Budget 2020 is not applicable to seafarers
The author of this article CA. Sachet Agarwal is Partner – International Taxation, Audit & Assurance of VRAC, having wide experience of filing IT Return for seafarers and RPSL’s.
CA. Sachet Agarwal
B.Com, CA, DISA (ICAI)
+91 9619510330 firstname.lastname@example.org