Merchant navy personnel and seafarers contribute significantly to Global maritime operations / trade, many of them spending long periods at sea on ships. In India, their income is taxed as per the Income Tax Act, 1961, which has no definitions for certain terms like “seafarer” or “merchant navy.” The tax liabilities depend on residential status of an individual, on the basis of days remained in the nation in a financial year. These professionals typically fall under the category of non-residents due to their offshore timing, sometimes holding their foreign-earned income exempt from Indian taxation under certain conditions.
Key points include maintaining non-resident status by staying outside India for at least 182 days (184 days in non-leap years), routing earnings through appropriate bank accounts, and complying with instructions of the Central Board of Direct Taxes (CBDT). Recent amendments introduction.
Residential Status Rules
The foundation of taxation on seafarers in India is their residential status under Section 6 of the Income Tax Act, 1961. A person is a resident if he resides in India for 182 days or more in a year, or 60 days or more along with 365 days in the previous four years. For Indian emigrants who travel abroad for work, such as seafarers, this 60-day limit is stretched to 182 days to provide non-resident (NR) status.
Finance Act 2020 amendments provided for a 120-day rule for Indian citizens or Indians who are of Indian origin and have Indian income over ₹15 lakh, excluding foreign sources such as ship earnings. When activated, the person becomes a resident but is considered Not Ordinarily Resident (NOR), exempting foreign income from tax. Seafarers tend to gain here because income from their main ship is not included in the ₹15 lakh threshold, leaving the standard 182-day criterion intact in most instances.
Special rules exist for days spent overseas. According to CBDT Notification No. 70/2015 dated April 1, 2015, time between sign-on and sign-off in the Continuous Discharge Certificate (CDC) counts as time outside India for trips beginning or concluding at Indian ports. This ensures NR status is upheld. The Income Tax Bill 2025 maintains these parameters intact, ensuring stability for maritime workers. Incorrect calculation of days can result in resident classification, taxing worldwide income, and therefore precise monitoring through CDC and passport is important.
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CBDT Circular 13/2017 & Seafarer Relief
Released on April 11, 2017, CBDT Circular No. 13/2017 brings great relief to non-resident seafarers by making it explicitly clear that salary received for service on a foreign-flagged ship outside India is exempt from taxation in India, even if credited to an Indian bank account. This overcame earlier controversies where such income was considered “received in India” and hence subject to tax.
Three requirements are necessary to qualify: the person must be considered a non-resident in terms of the Income Tax Act; as long as the salary is earned for services performed beyond Indian territorial waters on a foreign vessel; and the remittance is paid directly into a Non-Resident External (NRE) account in India. This circular is binding on tax authorities, lessening the chances of litigation against compliant seafarers, but individuals may still opt for other benefits under legal provisions or court judgments.
The relief is consistent with general NRI tax guidelines, keeping foreign-earned income exempt. It restricts, however, to salary received from foreign ships—those earning from Indian ships or domestic activities can still be subject to taxation. Seafarers need to check their contracts and voyage records so that they can avail of this exemption in full.
Bank Accounts: NRE vs NRO for Seafarers
Non-resident seafarers are required to handle finances in compliant bank accounts in accordance with RBI regulations for maximum tax benefits and repatriation. The two main choices are Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts, each of which has specific uses.
NRE accounts are suitable for crediting foreign-earned income, e.g., foreign seafarer wages. Money is retained in Indian rupees but is fully repatriable, including the principal and interest. Interest accruing is exempt from tax under Section 10(4)(ii) of the Income Tax Act, and no wealth tax is levied. Admissible credits are inward remittances, transfer from other NRE/FCNR accounts, and prevailing incomes like dividends (if repatriable). Debits facilitate local payments, cross-border remittances, and Indian investments. Joint holding is allowed with other PIOs/NRIs or resident kin on a ‘former or survivor’ basis.
Conversely, NRO accounts deal with Indian-sourced income, i.e., rentals or dividends. Interest is taxed according to slab rates, and repatriation stands at USD 1 million a financial year for NRIs/PIOs, including other assets, after tax. Credits may extend to local dues and other remittances from other NRO accounts, while debits account for domestic payments as well as current income remittances. Residents can be added in joint accounts.
For seafarers, routing salary to NRE account is crucial in order to avail exemptions under CBDT Circular 13/2017. Utilization of NRO for foreign income might attract unnecessary taxation. When back in resident status, NRE accounts have to be converted as resident or Resident Foreign Currency (RFC) accounts.
Taxability of Income Types
Income taxability varies by type and residential status. For non-residents, foreign earnings such as salary for services aboard foreign ships is exempt if conditions of CBDT Circular 13/2017 are fulfilled.
Salary: NR seafarers exempt if earned overseas on a foreign ship and deposited into an NRE account. Resident seafarers taxed on worldwide salary at regular slabs.
Interest: Interest on NRE account is exempt under Section 10(4)(ii). Interest on NRO is taxable, shown under ‘Income from Other Sources.’
Rental Income: Taxed if property is in India, irrespective of status, under ‘Income from House Property’ after allowances such as 30% standard allowance.
Capital Gains: Gains on sale of Indian assets (e.g., house, shares) are taxable. Long-term gains on equities are tax-free up to ₹1 lakh; others are subject to slab rates or indexed benefits.
Dividends: Taxable in hands of recipient since FY 2020-21, under ‘Other Sources,’ with TDS applicable.
Other Income: Pensions, commissions, or business income earned in India is taxable for all statuses. Slabs begin at 0% to ₹4 lakh under the new regime of Income Tax Bill 2025 and go up to 30% above ₹24 lakh, but Section 87A rebates are not available to NRIs.
Exempt income, such as NRE interest or qualifying salary, has to be reported in ITR for transparency.
ITR Filing Requirements for Seafarers
Although not necessarily necessary, filing of an Income Tax Return (ITR) is recommended for seafarers to establish financial records and prevent future inquiries. NR seafarers with overall Indian income less than ₹2.5 lakh (or ₹4 lakh under the new regime from FY 2025-26) with no refund claims can be exempted from filing, but those having tax-paying income in excess of the basic exemption amount, high-value transactions, or foreign assets are required to file.
Due date is July 31 of the year of assessment; late returns may be filed by December 31, with revised ITRs permitted now up to 48 months after the closure of the assessment year in accordance with Income Tax Bill 2025. For AY 2025-26 for FY 2024-25, file ITR-2 or ITR-3 where applicable, disclosing exempt income under Schedule EI.
Advantages are acting as evidence of income for loans, visas, or immigration, and countering tax department queries. Even exempt ship salary should be disclosed as exempt to keep records clean. NRIs cannot claim deductions such as Section 80C in case of opting new regime.
Documentation & Record Keeping
Maintaining thorough records is essential for seafarers to substantiate claims during assessments or audits. Key documents include:
- Continuous Discharge Certificate (CDC) showing sign-on/sign-off dates for voyage periods.
- Passport copies with entry/exit stamps to verify days in India.
- Employment contracts detailing ship details, foreign flag status, and service terms.
- NRE/NRO bank statements confirming salary credits and interest.
- Investment summaries for mutual funds, shares, or property, including purchase/sale deeds.
- ITR acknowledgments from prior years and any correspondence with tax authorities.
Common Pitfalls to Avoid
Seafarers usually face unnecessary mistakes in taxation. A common error is calculating residence status by excluding CDC entries, resulting in unintended resident classification and worldwide income taxation.
Depositing foreign salary in an NRO or resident account rather than NRE can waive exemptions, invoking tax on receipts considered “in India.” Not filing ITR, even if exempt, misses opportunities for proof in loans or visas and invites notices.
Other concerns are filing the incorrect ITR form, leading to mismatches in data; failure to report exempt income, which is an issue; or forgetting TDS on Indian income such as rentals. Assuming interest to be tax-free without making a distinction between NRE/NRO, or forgetting to update accounts on status change, can lead to penalties. Seek professionals’ advice at all times to manage these intricacies. .
Frequently Asked Question
It is not mandatory if you are not receiving taxable income. But filing is highly recommended as this facilitates processing of loans, issuance of visas, claiming of refunds as well as avoiding future disputes.
Regular due date: 31st July of the assessment year.
Belated ITR: Can be filed within 48 months using the new ITR-U option, though with a penalty.
- Passport and CDC (with details of sign-on/sign-off
- Contract of employment with shipping company.
- NRE/NRO bank account statements.
- Salary cheques or email from employers.
- Property and investment records.
It is exempt under Section 10(4)(ii) if you are a non-resident. Nevertheless, you report it under “Exempt Income” in the ITR.
It builds your financial track record in India. Guarantees that FEMA and Income Tax norms are followed. Serves as proof of NRI status if tax authorities question it.
