A sailor, seaman, mariner, or seafarer is a person who navigates waterborne vessels or assists as a crewmember in their operation and maintenance. They stay continuously in international water for more than 4-8 months or more/less as per contract.
Residential status of Marine Engineer under Income Tax Act of India
Provision of Indian Income Tax Act
A person resident in India in any year is liable to pay tax in India on his global income. A nonresident, on the other hand, is charged to tax in India only on income which is received or is deemed to be received in India or which accrues or arises or is deemed to accrue or arise to him in India. Thus, in the case of a non-resident, income which accrues or arises outside India and is also received outside India is not subjected to tax in India. So now the question arises, whether Indian Citizen being a crew member is a RESIDENT or NONRESIDENT under Indian Income Tax Act –
An Indian Citizen who is a member of crew of foreign going ships is regarded as a resident in India only if he is in India for 182 days or more during the relevant year irrespective of the extent of his stay in India in earlier years. The above days calculation shall be beginning on the date entered into the Continuous Discharge Certificate (CDC) in respect of joining the ship by the said Individual for the eligible voyage and ending on the date entered into the Continuous Discharge Certificate (CDC) in respect of signing off by that individual from the ship in respect of such voyage.
Big relief to Seafarer, the period spent by a ship In Indian coastal waters during sign in and sign off period is also taken into account for computing the non-resident status. Thus, generally, Indian members of the crew of a foreign-going Indian ship would be non-resident in India if they are on board such ship outside the territorial waters of India for 182 days or more during any year. Accordingly, such seamen will be charged to tax in India only in respect of earnings received in India or the earnings for the period when they are working within the Indian waters on coastal ships, etc.
However, unfortunately the Income Tax Tribunal, Kolkata in its judgment dated 1st June, 2016 took away the Income tax benefit of our seafarers on account of receiving remuneration in NRE (NON-RESIDENT EXTERNAL) account maintained with an Indian Bank, resulting many seafarers were served notice by the Income Tax department and had negative effect on the Income of seafarers all over India.
National Union of Seafarers of India (NUSI) and the Maritime Union of India (MUI) together strongly challenged the ruling of the Kolkata Tribunal. NUSI and MUI took up the matter with the Government of India at various levels at National Shipping Board, National Welfare Board, Maritime Administration, Ministry of Shipping, Ministry of Finance. NUSI and MUI also received thousands of petitions from seafarers in support. Central Board of Direct Taxes (CBDT), on receive of representation regarding the above matter, examined section 5(2)(a) of the Income Tax Act provide that only such income of a non-resident shall be subjected to tax in India that is either received or is deemed to be received in India. It is hereby clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because that said salary has been credited in the NRE account maintained with an Indian bank by the seafarer. (vide CBDTcircular no. 13/2017 dated 11th April’ 2017)
Conclusion :
1. Income by way of remuneration earned outside India shall not taxed in India.
2. But, Income which is received or is deemed to be received in India or which accrues or arises or is deemed to accrue or arise to him in India other than sl no. 1 taxable in India.
Some other important points:
a. Requirement of filling Income tax Return (ITR) by the NON-Resident in following cases :
1. Indian Income exceed basic exemption limit (i.e. Rs. 2,50,000/- presently).
2. Tax Deducted at sources (TDS) and wants to claim refund
3. Have a loss that they want to carry forward.
b. Last date of return filling date is 31st July’ 2017 for the Financial Year 2016-17 and so on.
c. If the Tax liabilities of NRI exceeds Rs. 10,000/- in a financial year then required to pay advance tax.