ITR filing for Seafarers
Learn everything about ITR filing for Seafarers such as taxability, tax rate, choosing ITR form, tax rates, due date, penalty, how to file ITR. Contact us for filing!
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Filing an Income Tax Return (ITR) is a critical responsibility for all salaried individuals, including seafarers. This annual process involves declaring income earned during the financial year and paying the applicable taxes to the government. In this guide you will learn about taxability, how to calculate residential status, tax rates, how to choose ITR form, how to file ITR, Due date and penalties for not filing ITR.
Who is a Seafarer?
Before delving into the specifics of seafarer taxation, it’s essential to clarify who qualifies as a seafarer. A seafarer, often referred to as a sailor, merchant navy personnel, mariner, or seaman, is an individual employed on a ship. This person is a member of the ship’s crew and may work in various roles related to the vessel’s operation and maintenance. Seafarers typically spend extended periods at sea as part of their job. Most seafarers from India are Indian citizens, but due to the nature of their work, they often qualify as Non-Resident Indians (NRIs) for tax purposes, depending on the time spent outside the country. Understanding this distinction is crucial for accurately calculating their tax liabilities and benefits.
What is an ITR?
An Income Tax Return (ITR) is a form that individuals and entities use to report their income, expenses, deductions, and taxes paid to the government. It is a crucial document for ensuring that taxpayers fulfill their legal duty to report their financial activities for a financial year from April 1st to March 31st.
Taxability of Seafarer's Income in India
The Income Tax Act, 1961 does not specifically define “Seafarer” or “Merchant Navy.” There are no specific provisions for exemption or taxation for these professions. Generally, a seafarer or merchant navy worker is someone who works on a ship, navigating or assisting as a crew member in the operation and maintenance of the vessel as part of their contractual employment.
Taxability under the Income Tax Act is based on an individual’s residential status, whether they are a seafarer, merchant navy worker, or any other profession. Seafarers, typically Indian citizens, are classified as Non-Resident Indians (NRIs) based on their days of stay in India.
Resident Seafarer: If a seafarer stays in India for 182 days or more during a financial year, they are considered a Resident. If also categorized as an Ordinary Resident, their global income, including earnings from ship work, is taxable in India.
Non-Resident or Not Ordinary Resident Seafarer: If a seafarer stays in India for less than 182 days in a financial year, they may be classified as a Non-Resident. If classified as Not Ordinary Resident based on past records, their foreign income is not taxable in India. However, they must ensure that this income is received outside India. As per CBDT clarification, income deposited in an NRE account is considered received outside India and thus not taxable in India.
On April 11, 2017, the income tax department issued Circular No. 13/2017, providing clarifications on seafarer taxation. The circular specifies that the salary of seafarers accrued outside India on foreign ships is not taxable in India if the following conditions are met:
- The salary is received in a Non-Resident External (NRE) account with an Indian bank.
- The salary accrual is for services rendered on a foreign ship.
- The individual earning the salary is classified as a Non-Resident in India under the Income Tax Act.
How to calculate Residential status?
The Income tax department issued Notification No. 70/2015 on August 17, 2015, providing guidelines for calculating the number of days a seafarer spends outside India. This notification addresses the litigation surrounding the determination of days spent outside India for ship workers and merchant navy employees. According to the Income-tax (Twelth Amendment) Rules, 2015, effective from April 1, 2015, the computation of days outside India is based on the Continuous Discharge Certificate (CDC). Specifically, the days are counted from the sign-on date to the sign-off date recorded in the CDC. This method helps seafarers maintain their Non-Resident status in India, as it provides a clear framework for determining their period outside the country.
What is New Residency Rule of 120 days?
Previously, individuals, including seafarers, were classified as Residents in India if they stayed in the country for 182 days or more in a financial year. Typically, seafarers planned their schedules to spend more than 185 days at sea, ensuring they stayed in India for less than 182 days, often between 4-6 months.
The Budget 2020 introduced a new rule stating that Indian citizens can be classified as Residents if they stay in India for 120 days or more and have a taxable income exceeding ₹15 lakh, excluding foreign ship income. However, most seafarers do not have taxable income in India above ₹15 lakh, so the new 120-day rule generally does not apply to them. They continue to be assessed under the 182-day rule. If a seafarer does meet the ₹15 lakh income threshold and stays over 120 days, they will be classified as Not Ordinary Resident (NOR), which has different tax implications. Proper tax advice should be sought to avoid litigation.
Income tax slab for Seafarers below 60 years (Old Regime)
| Income | Tax rates |
| Less than Rs.2,50,000 | 0% |
| Rs.2,50,000 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
You Can claim deduction under Section 80C, 80D, 80G, etc
In Old tax regime, a maximum tax rebate of Rs. 12,500 is available for income upto Rs. 5 lakhs meaning your income is totally tax free till Rs. 5 lakhs. But for NRI seafarer rebate is not available.
Income tax slab for Seafarers for all age groups (New Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.6,00,000 | 5% |
| Rs.6,00,001 – Rs.9,00,000 | 10% |
| Rs.900,001 – Rs.12,00,000 | 15% |
| Rs.12,00,001 – Rs.15,00,000 | 20% |
| More than Rs.15,00,000 | 30% |
You cannot claim any deduction under Section 80C, 80D, 80G, etc
In New tax regime, a maximum tax rebate of Rs. 25,000 is available for income upto Rs. 7 lakhs meaning your income is totally tax free till Rs. 7 lakhs. But for NRI seafarer rebate is not available.
Income tax slab for Seafarers between 60 & 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for Seafarers above 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.5,00,000 | 0% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Is ITR filing for Seafarers mandatory?
No, ITR filing is not required if your income from all sources including salary income is below the basic exemption limit of Rs. 2,50,000 under Old regime or Rs. 3,00,000 under new regime. In case the residential status is Non Resident Indian (NRI) then even if income is above basic exemption limit, ITR filing will not be compulsory for seafarer.
But even though it is not compulsory, it is highly recommended as ITR filing helps in building financial history, serves as income proof for applying for loan, credit card, Visa, helps to answer income tax notice with ease.
Which ITR form is applicable for Seafarers?
ITR-1: This form is for individuals with income from salary/pension, one house property, other sources (like interest income and total income up to ₹50 lakh. Individuals with business or professional income and capital gains cannot use this form.
ITR-2: This form is for individuals who do not have income from business or profession. It covers income from salary/pension, house property, capital gains, and other sources.
Hence Seafarers can use either ITR-1 or ITR-2 depending on income sources other than salary. If the Status of Seafarer is Non resident then ITR-2 is compulsory. If Seafarer is resident then either ITR-1 or ITR-2 will be applicable depending on other income.
Documents Required for ITR filing for Seafarers
- PAN Card
- Aadhaar Card
- Passport
- Continuous Discharge Certificate (CDC)
- Form 16 issued if any by employer
- NRE/NRO/Saving bank statement
- Ship contract
- Investment proof under section 80C or proof of any other deduction
- Form 26AS and AIS
- Other relevant documents depending on other income sources
Difference between Form 26AS and AIS
Form 26AS and the Annual Information Statement (AIS) are essential documents for taxpayers in India, each serving distinct purposes. Form 26AS acts as a tax passbook, summarizing taxes deducted, collected, and paid by the taxpayer during a financial year. It includes details on Tax Deducted at Source (TDS), Tax Collected at Source (TCS), advance tax payments, self-assessment tax payments, and any tax refunds received. The data in Form 26AS is sourced from employers, banks, and other entities that deduct or collect tax and from the taxpayer’s own payments.
In contrast, the AIS provides a comprehensive view of a taxpayer’s financial transactions, encompassing a broader range of information. It includes detailed records of interest and dividend income, shares and mutual funds transactions, property transactions, and significant gifts, among other financial activities. This information is sourced from banks, financial institutions, and other entities that report transactions to the Income Tax Department. Both Form 26AS and AIS is accessible on the Income Tax Department’s e-filing portal.
Step-by-Step Guide for ITR filing for Seafarers
1. Registering on the Income Tax E-Filing Portal
- Visit the Portal: Go to the official Income Tax Department e-filing website: www.incometaxindiaefiling.gov.in.
- New User Registration: If you are a first-time user, click on ‘Register Yourself’. Choose the ‘Individual’ category and enter your PAN, which will serve as your User ID.
- Fill in Details: Provide your basic details, contact information, and create a password.
2. Choosing the Correct ITR Form (ITR-1 or ITR-2)
3. Filling Out Personal Details and Income Information
- Select the Assessment Year: Choose the appropriate assessment year for which you are filing the return.
- Income Details: Enter your income details under the appropriate heads:
- Salary Income
- Income from Other Sources
- Business Income
- House property income
- Capital Gains
4. Claiming Deductions and Exemptions
- Deductions under Section 80C: Enter eligible deductions such as life insurance premiums, PPF, NSC, and tuition fees.
- Deductions under Section 80D: Include premiums paid for health insurance.
- Other Deductions: Claim deductions under other sections like 80E for education loan interest, 80G for donations, etc.
5. Verifying and Submitting the Return
- Calculate Tax: Click on ‘Compute Tax’ to see the tax liability or refund.
- Tax Payment: If there is any tax payable, pay it through the e-filing portal using net banking or other available options.
- Preview and Submit: Preview the completed ITR form, ensure all details are correct, and click ‘Submit’.
- Verification: After submission, verify your ITR within 30 days of filing. You can e-verify using methods such as Aadhaar OTP, net banking, or through a digital signature. Alternatively, you can send a physical signed copy of ITR-V to the Centralized Processing Center (CPC).
What is the Due date of ITR filing for Seafarers?
The Due date to file Income tax return for Seafarers is 31st July.
In case you have missed this deadline then you can file belated ITR till 31st December with late fees.
Also for any mistake made while filing ITR before 31st July, you can make corrections by filing Revised ITR any number of times till 31st December.
If you miss deadline of Belated income tax return filing then you can file Updated ITR till 2 years from the end of relevant assessment year with late fees and additional taxes.
What are the Consequences of non-payment of Tax and non-filing of ITR by Seafarers?
Failing to pay taxes and file your Income Tax Return (ITR) has severe consequences. Firstly, unreported income is deemed illegal, equating to tax evasion, and can result in a penalty of 100% to 300% of the evaded tax under Section 271(C). Secondly, a penalty ranging from 10% to 90% of the undisclosed amount may be imposed under Section 271AAB, depending on the circumstances. Lastly, if you miss the filing deadline, a 1% interest per month or part thereof will be charged on the unpaid tax amount as per Section 234A.
Conclusion
Understanding the taxability for seafarers or merchant ship personnel involves recognizing the residential status, applicable deductions and tax rates. By staying informed about these aspects, seafarers can file their Income tax return correctly by choosing the right ITR form. Regularly updating knowledge about income tax and seeking professional advice when needed can further aid in effective tax planning.
In case you still have any query or want to file ITR with CA assisstance then you can contact us at +91 9769647582
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