Govt Notifies New Rules On Tax-Free Status For Indian Seafarers

Move explores to the end deviation that is cited by the local fleet owners as the main reason for keen shortage of the sailors to man their vessels.

As Indian ships generally operate in the Indian trades and the Indian ships call usually at the Indian ports, a large number of the Indian crew employed on the Indian ships, though trading outside India, face difficulties in satisfying with the 182-day criteria for getting a non-resident Indian status.

The government has notified new tax rules for the seafarers who are working on ships flying the Indian flag to help them certify for the non-resident status and end a deviation that is cited by local fleet owners as the main reason for keen shortage of sailors to man their vessels.

The Central Board of Direct Taxes (CBDT) issued a gazette notification clarifying on Monday, the period of stay of seafarers outside India will be calculated from the date stamped on their continuous discharge certificate (CDC), a seafarer’s identity document at the time of joining the ship for the voyage till the date entered in the CDC at the time of signing off. As a result, the period spent by a ship in the Indian coastal waters is also taken into account for enumerating the non-resident status and the resultant tax concessions.

A per the Shipping Ministry spokesman, this will give a big boost to Indian shipping. Seafarers who are working on the Indian registered ships will now be on par with those working on foreign ships for the computation of non-resident status.

As per the tax rules frames in 1990, a seafarer serving on the Indian ships outside India for a period of 182 days or more in a year is treated to be a non-resident. Therefore, the time spent by a ship in the Indian territorial waters is treated as period of service in India.

For example, an Indian ship going from India to Singapore which passes through various Indian ports on its route, such as Nhava Sheva, Kochi, Kandla, etc. Hence, the Indian ship starting its journey from Nhava Sheva in Maharashtra heading for Singapore remains in the Indian coastal waters for quite some days before crossing the coastal boundaries of India.

In this case, the number of days outside India of the Indian crew working on such Indian ships gets calculated only from the date when the Indian ship crosses the coastal boundaries of India.

Therefore, the Indian crew serving on the foreign ships for 182 days or more are considered as non-resident, irrespective of where the ship trades which include Indian waters.

This led to a continuous drift of personnel from the Indian ships to the foreign flag ships under the appeal of higher “take home” pay packets, without having to pay the tax in India due to this unplanned differential the tax treatment.

As per the director, who looks after the personnel and the administration at Shipping Corp. of India Ltd said that this will help Indian ship owners to retain seafarers. He even said that the seafarers don’t have to join the foreign ships to get the non-resident status, which they were doing so far, who was elected by the government-head-hunter, the Public Enterprises Selection Board, to be the next chief executive of SCI.

This will help thousands of seafarers get their non-resident status as per the general secretary of the National Union of Seafarers of India (NUSI).

As a result, the Indian flag ships, which are by the law required to hire only the Indian crew, faced a keen shortage of the experienced manpower, especially

in the officers category.

On 28^th of February, while declaring the Union budget for 2015-16, the finance minister Arun Jaitley sought to end the deviation. In the case of the foreign bound ships where the destination of the voyage is outside India then there is confusion with regard to the manner and basis of assurance of the period of stay in India for the crew members of such ships who are the Indian citizens, as per the budget documents.

This article has been posted by Tax Assist.

Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.

With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.