Seafarer and merchant-navy tax: your NRI status and your salary

Your tax status is decided every financial year by how many days you spent in India (Section 6), and it can flip year to year depending on your sailing pattern.

The day-count works against you only if you're in India a lot. You're a resident if you're in India for 182 days or more in the year, or for 60 days or more in the year and 365 days or more across the previous four years. For a seafarer the practical version of this is the mirror image: you need to be out of India for at least 184 days (185 in a leap year) on employment to be a non-resident. Stay out that long and India taxes you only on your Indian-source income, not your worldwide salary.

The number people get wrong is the count itself — and that's where the next section, Rule 126, does the heavy lifting.

The single most important rule for a seafarer is how the days at sea are treated, because a literal reading of a calendar would wrongly pull many seafarers into resident status.

Rule 126 of the Income-tax Rules settles it. For an Indian citizen who is a member of the crew of a ship, the period of a foreign voyage is not counted as time in India. Specifically, the days from the date of joining the ship (the sign-on date recorded in your Continuous Discharge Certificate, the CDC) to the date of signing off are excluded from your in-India day-count, provided the voyage is an eligible foreign-going one.

In practice this means your CDC is the document that decides your residency. The sign-on and sign-off dates stamped in it, voyage by voyage, are what a CA adds up to show you were out of India for the 184+ days that make you a non-resident. Keeping the CDC complete and consistent with your passport stamps is the whole game — a few days miscounted at the boundary can be the difference between non-resident and resident for the year.

Rule 126 sounds clean, but three details around it cause most seafarer scrutiny, and they are worth knowing before a borderline year.

First, the exclusion is only for an eligible voyage, meaning a voyage that starts or ends at a port outside India. A purely coastal voyage between two Indian ports is not an eligible voyage, so those sailing days are not excluded and count as days in India. A seafarer who does a run of coastal work can quietly lose the buffer they assumed they had.

Second, time a ship spends in India's own territorial waters is generally treated as time in India, not time abroad. So days within Indian waters, even on an international voyage, can be counted against you, which is why the ports and the sign-on and sign-off dates have to be read carefully rather than assumed.

Third, the gap days between contracts. The department has tried to strip out the days a seafarer spends in India waiting for the next assignment, arguing they were not for employment. The Mumbai Tribunal in the M Gulati case rejected that, holding that days spent outside India for employment, including time genuinely spent finding the next assignment, count toward non-resident status. That decision was under the 1961 Act, so treat it as strong support rather than a settled certainty going forward, and keep evidence of why each gap period was employment-related.

The biggest fear seafarers carry is that because the salary hits an Indian bank account, India taxes it. For a genuine non-resident on a foreign ship, that fear is misplaced — but only if the salary goes to the right account.

CBDT Circular No. 13/2017 put this beyond doubt. Salary earned by a non-resident seafarer for services rendered on a foreign ship, where it is credited to an NRE account with an Indian bank, is treated as income received outside India. It is therefore outside the Indian tax net — it is not made taxable in India merely because the bank account sits in India.

The load-bearing word is NRE. The exemption rides on the salary being for services on a foreign ship, earned while you're a non-resident, and paid into an NRE account. If the same salary is paid into a resident savings account or an NRO account instead, you lose the clean "received outside India" position and invite an argument you didn't need to have. The fix is simple but it has to be done in advance: have the salary routed to an NRE account from the start.

A 2020 change made some Indians who pay no tax anywhere into "deemed residents," and seafarers sometimes worry it catches them. It usually doesn't.

The deemed-resident rule (Section 6(1A)) only applies to an Indian citizen whose Indian-source income, excluding foreign income, exceeds ₹15 lakh in the year and who isn't liable to tax in any other country. Linked to the same ₹15 lakh line, the 60-day residency trigger tightens to 120 days for that high-Indian-income group.

For most seafarers neither bites. Your ship salary is foreign-source (services on a foreign ship), and your *Indian* income — some NRO interest, maybe a little rent — is typically well under ₹15 lakh. So you stay on the ordinary 184-day test, and the 120-day rule and the deemed-resident rule simply don't reach you. It's still worth checking the ₹15 lakh line each year if you also have substantial Indian rent, business or capital gains, because that is the one scenario where a seafarer can be pulled back in.

Being a non-resident with tax-free ship salary does not always mean "nothing to file." Filing is about your Indian income and your refunds, not your status.

You should file an ITR-2 in India if you have Indian-source income — NRO interest, rent from an Indian property, capital gains on Indian shares or mutual funds — above the basic exemption, or if tax was deducted at source and you're due a refund. NRO interest in particular is often deducted at the full non-resident rate, and filing is how you claim the treaty rate and get the excess back.

Many seafarers also choose to file even in a year with little Indian income, simply to keep a clean record that establishes their non-resident status — useful for banks, for visa and loan paperwork, and for avoiding the stale-record problems that flag a PAN as inoperative. The ship salary itself goes in as exempt income; what drives the return is everything else.

Rakesh sailed on foreign-going tankers for 210 days last year, joining and signing off at ports in the Gulf and Singapore, with his salary paid into an NRE account in Kochi. Back home between contracts, he spent about 150 days in India.

On a naive calendar he was "in India" for 150 days and out for 215 — already past 184. But Rule 126 matters even at the margins: the voyage days recorded in his CDC are excluded from the in-India count, so even the travel-and-port days around his contracts don't drag him toward resident status. He's comfortably a non-resident for the year.

His ship salary, paid to the NRE account for services on a foreign ship, is treated as received outside India under Circular 13/2017 — not taxed here. He does have ₹3,80,000 of NRO fixed-deposit interest on which the bank deducted TDS, so he files an ITR-2: the ship salary goes in as exempt, the NRO interest is taxed at his treaty rate, and the over-deducted TDS comes back as a refund. Total Indian tax on the salary that worried him: nil.