ITR Filing for Indian Seafarers & Merchant Navy Staff

Indian seafarers and merchant navy personnel often face confusion regarding income tax compliance. Their frequent travel and service on foreign ships across international waters pose unique challenges in determining residential status, taxability of income, and Income Tax Return (ITR) filing obligations.

Although Indian tax laws do not have separate provisions for seafarers, the Income Tax Act, 1961, along with relevant CBDT Circulars and judicial precedents, offers guidance that can help avoid unnecessary tax liability or scrutiny.

This detailed article explains:

How residential status is determined for seafarers
Which income is taxable in India
When salary is exempt
Rule 126 and how it helps crew members
CBDT clarifications on NRE salary
Whether ITR filing is mandatory
Benefits of ITR filing for seafarers
Case laws supporting exemption

1. Why Residential Status is Crucial for Seafarers

The first and most important step for any seafarer or merchant navy professional is to determine residential status under Section 6 of the Income Tax Act. Your residential status decides what income is taxable in India.

As per Section 6(1) of the Income Tax Act:

An individual is Resident in India if:

They were in India for 182 days or more during the previous financial year
or
They were in India for 60 days or more during the year and 365 days or more during the last 4 preceding years

Exception for Indian Citizens leaving India for employment abroad (including seafarers):
The 60-day condition is replaced with 182 days, making it easier for Indian seafarers to qualify as non-residents.

2. Introduction of the 120-Day Rule (Finance Act, 2020)

To prevent “double non-taxation” (not paying tax in any country), the Finance Act, 2020 introduced stricter residency rules for high-income Indian citizens.

If the following conditions are met:

Indian citizen (seafarer or otherwise)
Stay in India between 120 and 182 days
Indian income (excluding foreign income) exceeds ₹15 lakhs

Then, you are considered Resident but Not Ordinarily Resident (RNOR) – not eligible for full tax exemption.

Key Point:
If Indian income is below ₹15 lakhs, only the 182-day rule applies.

Most seafarers earning salary abroad and less than ₹15 lakh in India will remain non-resident if they stay outside India for 183 days or more.

3. How to Calculate Days Outside India — Rule 126 Explained

Rule 126 of the Income Tax Rules provides relief specifically for crew members on ships.

As per Rule 126:

The period spent outside India starts from the date of joining the ship (as per CDC) and ends on the date of sign-off from the ship (as per CDC) – provided the ship is on an eligible voyage.

Eligible Voyage Defined:

Begins at an Indian port and ends at a foreign port
Or starts at a foreign port and ends at an Indian port

What’s the Role of CDC?

The Continuous Discharge Certificate (CDC) is an official document under the Merchant Shipping Act, 1958, that records seafarer’s assignments. Dates entered in the CDC are treated as valid for tax purposes when applying Rule 126.

This helps reduce the number of days considered “in India”, increasing chances of qualifying as a Non-Resident.

4. Taxability of Seafarer Income — Resident vs Non-Resident

If Resident:

A resident’s global income is taxable in India, including:

Salary earned on foreign ships
Remittance into Indian or foreign bank accounts

You can claim normal deductions like:

Section 80C: PPF, LIC, tuition fees, etc.
Section 80D: Health insurance
Section 80G: Donations
Section 80GG: Rent
Section 80TTA: Savings account interest (up to ₹10,000)

If Non-Resident:

As per Section 5(2) of the Income Tax Act, only the following are taxable for non-residents:

Income received in India, or
Income that accrues or arises in India

Salary earned for services performed outside India, on foreign ships, and credited to an NRE account in India is not taxable.

5. CBDT Circular No. 13/2017 – Seafarers’ Income Not Taxable

In April 2017, the Central Board of Direct Taxes (CBDT) issued Circular 13/2017 to clarify the tax position for Indian seafarers.

Summary of CBDT Circular 13/2017:

If a seafarer is a non-resident, and
He earns salary for services performed outside India on a foreign ship, and
Salary is credited directly to an NRE bank account in India

Then, the salary is not taxable in India.

6. Important Case Law: Tarun Kumar Sarkar v. ITO [84 taxmann.com 91]

This Income Tax Appellate Tribunal (ITAT) judgment supports seafarers’ claims of tax exemption.

Facts:

Non-resident Indian seafarer
Salary credited into Indian NRE account
Salary earned while working on a foreign ship

Decision:

The ITAT ruled that such salary is not taxable, even if mistakenly shown in the ITR.

This confirms that mere credit to NRE account does not make it taxable if earned outside India while being non-resident.

7. ITR Filing for Seafarers — Mandatory or Optional?

Not Mandatory:

If you are a non-resident and have no taxable income in India, filing ITR is not compulsory.

Still Recommended:

Filing ITR offers several long-term benefits:

Reason	Benefit
Income Proof	For loans, visas, property deals
Loan Eligibility	Banks/NBFCs often ask for last 2-3 ITRs
Visa Processing	Many countries ask for ITR during visa applications
Avoid Tax Notices	Proactive filing avoids random scrutiny
Refund Claim	If TDS is wrongly deducted

8. Important Documents Required for Seafarer Tax Compliance

Passport (for arrival/departure stamp verification)
CDC (Continuous Discharge Certificate)
Contract of employment or voyage confirmation
Bank Statements (especially NRE accounts)
Salary slips or credit confirmations

9. Sample Scenarios

Case 1: Seafarer earns salary on a foreign ship, stays outside India for 190 days, salary credited to NRE account.
Result: Not taxable. Filing ITR is optional but recommended.

Case 2: Seafarer returns to India early, stays for 200+ days, salary credited to foreign account.
Result: Taxable in India. Must file ITR. Can claim applicable deductions.

Case 3: Seafarer’s Indian income (rent, mutual fund gains) exceeds ₹2.5 lakhs but ship salary is exempt.
Result: Must file ITR. Report Indian income and claim exemption on foreign salary.

10. Professional Support for Seafarers’ Tax Compliance

Handling seafarer taxation involves nuanced interpretations of law, rules, and documentation. Our expert team helps with:

Residential Status Assessment
Claiming Salary Exemption
Accurate ITR Filing and Avoiding Notices
Handling Scrutiny or Tax Notices
Financial and Tax Planning for Seafarers

Conclusion

For Indian seafarers and merchant navy staff, the correct determination of residential status, maintenance of documentation such as CDC and passport stamps, and awareness of CBDT guidelines are crucial for tax compliance.

While most non-resident seafarers can legally avoid income tax on foreign-earned salary, filing ITR is a smart move that helps with documentation, finance, and avoiding future disputes.

FAQs on Seafarer Income Tax

Q1. What is the minimum number of days outside India for a seafarer to become non-resident?
183 days or more outside India (after applying Rule 126)

Q2. Is income received in NRO account taxable?
Yes, unless it is a transfer from your foreign account. If salary is directly credited to NRO, it is generally taxable.

Q3. What is RNOR status and how does it apply to seafarers?
RNOR (Resident but Not Ordinarily Resident) applies if you stay in India for 120–181 days and your Indian income exceeds ₹15 lakh.

Q4. Can seafarers claim deductions like 80C, 80D?
Only residents and RNORs can claim these deductions. Non-residents have limited deduction eligibility.

Need CA in Noida to Help Filing Your ITR as a Seafarer?
We specialize in tax filing for Indian crew members. Contact us to ensure proper compliance and maximum tax benefit.