Seafarers - No need to pay

tax even if you have not

completed 184 days (NRI
days) outside India for FY
2020-21

April 2021

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 As we all are aware that
Financial Year (FY) 2020-21 has
been a roller coaster ride for
everyone due to COVID 19
pandemic, crew change during
these tough times was a
challenge due to international
flight restrictions. As a result,
many Indian Seafarers were
not able to complete NRI days
i.e., 184 days outside India
during the FY 2020-21. This has
resulted in change in the
residential status of many
Seafarers for the FY 2020-21.

In this publication, we shall

highlight the provisions of the
Income Tax Act,1961 which
undoubtedly display the
conditions where the Seafarers
will not be liable to pay income
tax even if they have not sailed
for more than 184 days outside
India during the FY 2020-21.

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 Types of Residential Status
Resident Indian
Non Resident Indian (NRI)
Resident Indian
If a seafarer stays in India for
more than 182 days in a
financial year i.e., if the seafarer
is not able to sail for more than
184 days outside India in a
financial year, then the
seafarer’s residential status will
be classified as Resident Indian.
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Further, there are two sub
categories for classification,
once a seafarer is primarily
classified as a Resident Indian.
This sub categories will help to
determine whether the income
earned from sailing in foreign
ships outside India will be
taxable or not in the FY 2020-
21.
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 Resident & Ordinary
Resident (ROR)
Conditions for becoming
Resident & Ordinary Resident
(ROR)
A seafarer shall be classified as
ROR for the FY 2020-21 if the
following conditions are
satisfied:
1. A Seafarer stays in India for
more than 182 days in a FY
AND
2(a). A Seafarer is a Resident
Indian for at least 2 FY’s out of
preceding 10 FY’s
OR
2(b). A Seafarer stays in India for
more than 729 days in
preceding 7 FY’s
If a Seafarer is "Resident &
Ordinary Resident" (ROR) for FY
2020-21, then all the income
earned, whether in India or
outside India will be taxable in
India.
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Hence, in case a seafarer whose
residential status is ROR for the
FY 2020-21, the income from
sailing in foreign ships will also
be taxable in India.
Thus, seafarer whose
residential status is ROR for
the FY 2020-21 must
compulsorily file their Income
Tax Return (ITR) and pay the
tax on the entire income
earned whether from sailing
or other income by 31st of
July, 2021, unless the date is
extended by Central Board of
Direct Taxes (CBDT). Non filing
of ITR and non-payment of tax
shall attract huge penalty and
interest as per the provisions
of the Income Tax Act, 1961.
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 Resident & Non-Ordinary
Resident (RNOR)
Conditions for becoming
Resident & Non-Ordinary
Resident (RNOR)
A seafarer shall be classified as
RNOR for the FY 2020-21 if the
following conditions are
satisfied:
1. A seafarer stays in India for
more than 182 days in a FY
AND
2(a). A Seafarer is a Non-
Resident Indian (NRI) in any 9
FY’s out of preceding 10 FY’s
OR
2(b). A Seafarer stays in India for
less than or equal to 729 days in
preceding 10 FY’s
If a seafarer is “Resident & Non-
Ordinary Resident” (RNOR) for
FY 2020-21, then income earned
outside India is not taxable in
India.
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However, income earned from
outside India is taxable if the
business from which the income
is earned is controlled from
India.
Once seafarers are classified as
RNOR for the FY 2020-21, they
can undoubtedly take this
advantage wherein they will not
be required to pay any tax on
income earned from sailing in
foreign ships, even if they are
staying in India for more than
182 days i.e., they have not been
able to sail outside India for
more than 184 days in the FY
2020-21.
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 Non-Resident Indian (NRI)

Seafarers who stay in India for less than 182 days i.e., they sail
outside India for 184 days or more, will be classified as a Non-
Resident Indian (NRI) for the FY 2020-21.

Being a Non-resident Indian, income earned outside India is not

taxable in India. Seafarer’s foreign income i.e., income from
services provided on foreign ship will not be taxable in India.
However, as per CBDT circular (April 2017), the seafarer need to
receive their income in Non-Resident External (NRE) account. (Read
more about NRE account in our March 2021 publication –
https://tinyurl.com/seafarerstax)

Even if a seafarer is Non

Resident Indian (NRI) for
the FY 2020-21, it is
always advisable to file
Income Tax Return (ITR)
since filing ITR has many
benefits such as easy
loan processing, visa
application etc.

Also, CBDT has started

linking PAN based Bank
account of the seafarers with the ITR filed by them. If they don't file
their ITR for the FY 2020-21, there is 100% chances of receiving
notice from the Income Tax Department for the source of income.

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 No Tax Impact on Seafarers with respect to
Budget 2020 - Rule of 120 Days Stay in India

Seafarers are Resident Indian

if they stay in India for 182
days or more as explained
above. They plan their sailing
in such a way that they sail in
foreign waters for more than
184 days. Therefore, they
spend time in India only for 3
to 5 months which is less
than 182 days. Normally,
they stay in India for more
than 120 days.

Budget 2020 has introduced

provisions in relation to
Residential Status. It states
that a person shall be
considered as resident in
India if the stay in India is for
120 days or more. Hence, if
this new residency rule is
applicable to seafarers, it can
be a huge tax burden on the
seafarers. But there is a twist
in the new residency rule.

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 This rule of 120 days is
applicable if the taxable
income of the seafarer in
India exceeds Rs. 15 lakhs.
Generally, taxable income in
India of most of the seafarers
do not exceed Rs. 15 lakhs.
Therefore, the new rule of
120 days shall not be
applicable to seafarers.

Even if a seafarer stays in

India for more than 120 days
and his taxable income from
India exceeds Rs.15 lakhs,
the residential status of the
seafarer will be Resident &
Non-Ordinary Resident
(RNOR) for the FY 2020-21.
Thus, the seafarer will not be
required to pay any tax in
India on the income earned
from sailing in foreign ship.

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Conclusion

Even if a seafarer is not able to complete 184

days outside India in FY 2020-21, but is a
Non-Resident Indian (NRI) in any 9 FY’s out of
the preceding 10 FY’s, or the stay in India is
less than 729 days in preceding 7 FY’s, then
the income earned from sailing in foreign
ships shall not be taxable in India by claiming
the advantage of “Resident & Non-Ordinary
Resident” (RNOR) status in FY 2020-21.

Therefore, by claiming RNOR status, the

seafarers will not be liable to pay income
tax on the income earned from sailing in
foreign ships for the FY 2020-21.

Disclaimer: This publication is personal and general opinion

of the author and team SeafarersTax.Org. Kindly consult
before taking any decision.

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