Merchant Navy Taxation for Seafarers in India | Savlana Init

Seafarer Taxation · Merchant Navy

Merchant Navy Taxation — Counted by the CDC, Not the Calendar.

A seafarer’s tax position turns on sign-on and sign-off dates, the flag of the vessel and where the salary lands. Get any one wrong and an exempt year becomes a taxable one.

Seafarer taxation is a narrow specialism inside Indian income tax, and it is governed by provisions most general practitioners never open. The starting point is the same Section 6 day-count that applies to everyone, but two carve-outs change the arithmetic entirely. First, an Indian citizen who leaves India as a member of the crew of an Indian ship is tested against 182 days rather than the ordinary 60-day limb. Second, and far more important in practice, Rule 126 of the Income Tax Rules excludes from the count of days in India the period spent on an eligible voyage, measured from the sign-on date entered in the Continuous Discharge Certificate to the sign-off date entered in it.

An eligible voyage is a voyage undertaken by a ship engaged in the carriage of passengers or freight in international traffic, where the port of origin is in India and the port of destination is outside India, or the port of origin is outside India and the destination is in India. The consequence is that a seafarer who joins a vessel in an Indian port and sails internationally is not treated as being in India for those days even though the voyage began here. Voyages entirely within Indian coastal waters do not qualify, and the distinction between coastal and international trading is therefore decisive rather than incidental.

The third question is where the salary is treated as received. CBDT Circular 13 of 2017 settled a long-running dispute by clarifying that salary accrued to a non-resident seafarer for services rendered outside India on a foreign-going ship is not to be included in total income merely because it is credited to his NRE account in India. That single clarification is what makes the standard seafarer arrangement work — non-resident status through the CDC day count, foreign employer, foreign vessel, salary credited to an NRE account, no Indian tax. Where any element of that chain breaks, the whole position changes. We build and document the chain, year by year.

Our Merchant Navy Tax Services

CDC-Based Day Computation

Reconstruction of your day count from the Continuous Discharge Certificate, applying the Rule 126 exclusion for each eligible voyage across the financial year.

Eligible Voyage Verification

Testing each voyage against the international traffic requirement, so that coastal and domestic legs are correctly excluded from the relief.

Residential Status Opinion

A written Section 6 determination for the year, incorporating the crew-member relaxation and the Rule 126 exclusion, with the reasoning recorded.

NRE Salary Structuring

Advice on routing wages through an NRE account so that Circular 13 of 2017 applies, including the account and remittance arrangements that support it.

Indian Flag Vessel Advisory

Treatment of service on Indian-flag ships, where the exemption position differs materially from service on a foreign-going vessel.

Coastal Voyage Impact Review

Assessment of the effect of coastal contracts, dry-dock periods and shore assignments on the year’s day count and status.

Documentation Pack

Assembly of the CDC extract, seafarer employment agreement, vessel particulars, wage account statements and passport record into a defensible file.

Notice and Scrutiny Defence

Representation where an assessing officer disputes non-resident status, voyage eligibility or the NRE credit position, including appeals.

Our Process

CDC and Contract Review

We take your Continuous Discharge Certificate, seafarer employment agreements and passport, and build a voyage-by-voyage record for the financial year.

Voyage Eligibility Testing

Each voyage is tested for international traffic, and the sign-on to sign-off period of every eligible voyage is excluded from the Indian day count.

Status Determination

The residual day count is applied to Section 6, including the 182-day crew relaxation, to fix your status as resident or non-resident for the year.

Income and Receipt Analysis

Wages are traced from the employer to the account of credit, and the receipt position is established under Circular 13 of 2017.

Filing and File Building

The return is filed on the correct basis and the supporting documentation is preserved in a form that will answer a query three years later.

Why It Matters

✓Rule 126 exclusion applied voyage by voyage, not estimated

✓Non-resident status secured on documentation, not on assumption

✓Salary credited to NRE treated correctly under Circular 13/2017

✓Coastal and dry-dock periods identified before they break the count

✓Indian-flag service assessed separately from foreign-going service

✓A documentation pack that answers a scrutiny notice on its own

✓Return filed even where exempt, protecting refunds and loan evidence

✓Representation by the team that built the position, if it is questioned

Frequently Asked Questions

The ordinary test applies — you are resident if present in India for 182 days or more in the financial year, or 60 days or more combined with 365 days over the preceding four years. An Indian citizen leaving as a member of the crew of an Indian ship is tested at 182 days instead of 60. Because Rule 126 removes eligible-voyage days from the Indian count, the practical target for most seafarers is to remain in India for fewer than 182 counted days.

Rule 126 provides that for an Indian citizen who is a member of the crew of a ship, the period beginning on the date entered into the Continuous Discharge Certificate for joining the ship and ending on the date entered for signing off, in respect of an eligible voyage, is not counted as a period of stay in India. The CDC entries govern — not the ticket, not the contract and not the port log.

A voyage undertaken by a ship engaged in the carriage of passengers or freight in international traffic, where either the port of origin is in India and the destination outside India, or the origin is outside India and the destination in India. A voyage between two Indian ports is not eligible, so coastal trading periods are counted as days in India even though you are at sea.

Not where you are a non-resident and the salary accrued for services rendered outside India on a foreign-going ship. CBDT Circular 13 of 2017 clarified that such salary is not to be included in total income merely because it is credited to an NRE account maintained in India. The exemption depends on non-resident status and on the services having been rendered outside India — the account is not what creates it.

Not automatically. The crew relaxation in Section 6 refers specifically to a member of the crew of an Indian ship leaving India, and Rule 126 applies to eligible voyages regardless of flag. But the salary position differs: where an Indian employer pays a resident seafarer, or where services are rendered within India, the income is taxable in the ordinary way. Flag, employer and trading pattern must each be considered.

There is often no legal obligation where Indian income is below the exemption limit, but filing is usually advisable. It creates a documented record of the non-resident position, supports loan and visa applications, allows recovery of any tax deducted on Indian interest or investments, and preserves the ability to carry forward capital losses. A year filed contemporaneously is far easier to defend than one reconstructed later.

Sailing internationally and unsure of your tax position?

Send us your CDC and contracts for the year. We will compute the Rule 126 exclusion voyage by voyage, fix your status in writing and file on the correct basis.