Offshore oil-rig and continental-shelf workers: when your rig days count as India

The instinct that a rig far out at sea must be outside India is exactly the trap. India closed this gap in 1983. By notification G.S.R. 304(E), dated 31 March 1983, made under the law governing India's maritime zones, the Income-tax Act was extended to India's continental shelf and exclusive economic zone with effect from 1 April 1983.

The consequence is direct: for income-tax purposes, India's designated offshore areas are part of India. A rig standing on India's continental shelf, or a vessel operating in its exclusive economic zone, is treated as being in India. So the time you spend working on such a rig counts as time in India for the residency day-count, and the pay for that work is Indian-source income. This is why an offshore worker who genuinely believes they have been abroad all year can be assessed as a resident, or taxed on rig pay they thought was foreign. The feeling of being at sea is not the test; the location of the installation is.

Because the answer turns on location, the real work is splitting your rotations. Days spent on a rig inside India's designated continental shelf or exclusive economic zone are Indian days, and the pay for them is Indian-source. Days spent on a rig in another country's waters, or in international waters for a foreign operator, are days abroad, and that pay is foreign-source.

So a worker who rotates between an ONGC-operated field off the Indian coast and a project in West African or Gulf waters has two different tax answers in the same year, and they have to be separated rig by rig and rotation by rotation. The residency test then runs on the Indian-zone days plus any ordinary days in India between rotations. Two things make this harder than it sounds: the pay is often denominated differently for the Indian and foreign legs, and the boundary of the designated area is a legal line, not a feeling of distance from shore. The documentation that fixes it is your rotation schedule, the field or block each rotation was in, and your passport, read together.

It is natural to reach for the seafarer rule, because the life looks similar. It does not apply. Rule 126 excludes the days of an eligible foreign voyage from the in-India count, but only for a citizen who is a member of the crew of a ship, tied to the sign-on and sign-off dates of a Continuous Discharge Certificate.

A drilling rig or a fixed platform is not a ship carrying passengers or freight in international traffic, and a rotation onto an installation is not a voyage. So there is no voyage-day exclusion for offshore-rig work, and none of the softening that keeps a merchant-navy officer comfortably non-resident. Every Indian-zone rig day, and every ordinary day in India, counts in full. A rig worker who assumes the seafarer treatment applies is the most common way this goes wrong, because it leads them to under-count their Indian days and file as a non-resident when they are not.

If you are engaged by a foreign operator or service company rather than an Indian one, there is a second layer that affects how your pay is taxed and withheld. A foreign operator's rig or installation, used in India for exploring or extracting oil and gas, can itself amount to a permanent establishment in India under Article 5 of the relevant treaty, often once it is present beyond a duration threshold.

Where that permanent establishment exists, India taxes the connected receipts of the non-resident service provider on a presumptive basis under Section 44BB, at 10% of the gross amounts for services and equipment used in oil and gas work, and the payer withholds accordingly. That is a company-level rule, but it shapes the contract chain you sit in and how your remuneration is characterised and taxed, so it is worth understanding rather than being surprised by. Where the treaty gives a better answer than the domestic rule, the treaty can be claimed. The point for an individual is that offshore pay routed through a foreign operator is not automatically clean foreign income; the installation-PE question sits underneath it.

Vikram earns about 60 lakh rupees a year across his drilling rotations. Last year he spent 120 days on a field on India's continental shelf off the Mumbai coast and 90 days in Gulf waters for a foreign operator, with about 65 more days at home between rotations. He assumed all his offshore time was abroad and that he was a non-resident.

When his CA maps it out, the picture changes. The 120 days on the Indian-shelf field are Indian days, because the continental shelf is within India for tax since 1983, and that pay is Indian-source. Only the 90 Gulf-waters days are foreign. Adding the 120 Indian-shelf days to his 65 days at home gives 185 days in India, over the 182-day line, so he is a resident for the year. His Indian-shelf pay is taxed in India as it always would be, and the Gulf pay is examined under the relevant treaty, with credit for any foreign tax. Vikram is not worse off than the law requires, but he is not the clean non-resident he assumed, and filing as one would have invited a notice. The value was in getting the day-split right before, not after.