Sailors and seafarers sail through and visit multiple countries on their voyage. This raises the question of how is income tax for sailors decided. It depends on whether the sailor was a resident or non-resident in the relevant year. If they were a resident, they are taxed on all of their income as per applicable tax slabs. If they were a non-resident, it is different.
Who are non-resident sailors?
Non-resident status is decided as per the number of days for which the sailor lived in India. If they had lived in India for less than 182 days, they are considered NRIs. The period of stay outside India is calculated as per the CDC.
What is the CDC?
Continuous Discharge Certificate is a sailor’s id document. It must be prepared as per the Merchant Shipping Act, 1958 and comply with Merchant Shipping (Continuous Discharge Certificate-cum-seafarer’s Identity Document) Rules, 2001.
How is the period of stay outside India calculated?
The CDC must pertain to a voyage which has either its beginning or its destination at an Indian port. The stay outside India is calculated from the start date mentioned on CDC till the end date signed off on CDC.
What about foreign ships?
If a sailor works on a foreign sailing ship for 182 days or more in a year, they are considered as non-residents even if the ship trades in Indian waters, and are exempt from income tax for sailors.
And what about the Indian ships?
A sailor is considered a non-resident if they serve in foreign countries on an Indian ship for 182 days or more. However, if Indian ship sails in Indian waters, it is considered as service in India. The period of working outside India is counted from the day on which the Indian ship crossed India’s coastal boundaries.
What about a sailor who has undertaken multiple foreign voyages?
Their separate periods of stay outside India will be added and calculated as aggregate stay outside India.
What is an NRE account?
A Non-Resident External account is an account with an Indian bank in which a sailor receives a salary, and the salary is converted in INR at the time of deposit. Earlier, there used to be a tax on NRE account for sailors. However, in 2017, the Central Board of Direct Taxes (CBDT) changed this and made it non-taxable for non-resident sailors. Now, salary deposits in an NRE account are not calculated in income tax for sailors.
What about interest on an NRE account?
There is no tax on NRE account for interest earned by a sailor on their deposits. Interest on an NRE account is also non-taxable for non-resident sailors.