Clarification on Residential Status of Seafarers on Foreign Flag Vessels Operating in IndianCoastal Waters

We at Tax Harbour have recently received several queries regarding the residential status of Indian seafarers working aboard foreign flag vessels operating in Indian coastal waters. These questions often arise in cases where:

• The salary is credited in foreign currency to a Non-Resident External (NRE) account,

• The seafarer’s Continuous Discharge Certificate (CDC) bears a “Foreign-Going” (FG) stamp, and

• The vessel is registered under a foreign flag (e.g., Panama).

Legal Framework

As per Explanation 2 to Section 6(1) of the Income Tax Act, 1961, read with Rule 126 of the Income Tax Rules, a seafarer’s service qualifies as an “eligible voyage” only if it involves:

1. A voyage from an Indian port to a port outside India, or

2. A voyage from a port outside India to a port in India.

Key Clarification

The following elements, do not independently determine a seafarer’s residential status under Indian income tax law:

• The flag of the vessel (foreign or Indian),

• Receipt of salary in an NRE account in foreign currency,

• The presence of an FG stamp on the CDC.

Where the vessel is operating within Indian coastal waters (i.e., not engaged in international voyages as defined above), such periods of service are treated as stay in India for the purpose of determining residential status.

Supporting Evidence

Although there may be no single document confirming coastal operation, the voyage history and movement of the vessel can generally be confirmed through online ship tracking tools, which serve as practical evidence in case of scrutiny. We hope this note helps clarify the issue. Please feel free to reach out to us for further guidance.

Warm regards,

Team Tax Harbour