Supporting Indian Seafarers: Tax Harbour’s Submissions to the Income Tax Department

At Tax Harbour, we recognize the unique challenges faced by Indian seafarers in meeting

their tax obligations. Their work takes them across international waters under unpredictable

schedules, making tax compliance more complex than for most professionals.

To address these issues, the Tax Harbour Team has submitted the following detailed

suggestions to the Income Tax Department, aimed at bringing clarity, fairness, and

administrative ease for seafarers under the Indian tax regime.

Suggestion Under Rule 119A – Interest Relief under Sections 234B and 234C for Indian Seafarers

Background

This submission is made under Rule 119A, in relation to Sections 234B and 234C of the

Income Tax Act, as the online grievance portal does not allow section-specific suggestions.

Indian seafarers, especially those employed on foreign-flagged ships, face unique challenges

in determining their tax liability during the financial year. Their residential status under

Section 6—which directly affects the taxability of foreign income—often cannot be

confirmed until late in the year due to the unpredictable nature of their work.

Key Issues

As per current provisions, advance tax is to be paid in instalments:

• 15% by 15th June

• 45% by 15th September

• 75% by 15th December

• 100% by 15th March

Interest under Sections 234B and 234C is levied if these payments are missed or deferred.

However, Indian seafarers often cannot ascertain their residential status early enough to

determine whether their foreign income will be taxable in India. This uncertainty arises from:

• Irregular sailing schedules

• Sudden contract changes or extensions

• Limited control over the number of days spent in India

Due to this, many seafarers either delay or underpay their advance tax, leading to interest

even when the entire tax liability is discharged by 31st March. Moreover, salaries received

from foreign shipping companies usually have no TDS deduction, further complicating

advance tax calculations.

Suggestions

• Indian seafarers be permitted to pay their full advance tax by 31st March without incurring interest under Sections 234B and 234C.

• Eligibility for this relief can be based on documents such as the Continuous Discharge Certificate (CDC) and foreign shipping contracts, as already used under Rule 126.

This small but meaningful change would:

• Encourage better compliance from a highly mobile and globally employed workforce

• Reduce unintentional interest liabilities and related disputes

• Promote fairness and practicality in tax administration for seafarers

Suggestion for Clarification on Use of CDC vs. Passport Dates for Residential Status of Seafarers under Section 6

Background

Under Section 6 of the Income Tax Act, an individual is treated as a Non-Resident if they stay in India for less than 182 days (or 120 days in certain specified cases) during a financial year. For Indian seafarers, determining residential status is of vital importance, as it directly

impacts the taxability of foreign-earned salary.

Rule 126 allows the period spent outside India on eligible voyages to be determined using

entries in the Continuous Discharge Certificate (CDC). However, in practical application,

seafarers often face uncertainty regarding which document—CDC or passport immigration

stamps—should be relied upon for accurate computation of days spent outside India.

Key Issues

1. Joining from International Ports

   Many seafarers fly directly to foreign countries to board ships and return similarly. In such cases, passport stamps correctly reflect actual departure from and arrival into India, whereas the CDC records only the date of joining or sign-off on the vessel, which may not align with travel dates.

2. Mismatch in CDC Entries

   Entries in the CDC are made by the ship’s master and may not always reflect the actual dates of embarkation or disembarkation. This mismatch has at times led to disallowance of Non-Resident status, even when passport records support continuous stay abroad.

3. Absence of Standard Guidelines

   There is currently no formal guidance on which document should be prioritized. As a result, seafarers face confusion during return filing and assessments, increasing the risk of inadvertent non-compliance.

4. Voyages on Foreign-Flagged Ships Within Indian Waters

   Some seafarers serve on foreign-flagged vessels that operate only within Indian coastal waters. Despite receiving CDC entries and foreign currency salary, these voyages are technically not “outside India” and need clearer classification.

Suggestions

1. CDC entries may be considered for computing days outside India in cases where seafarers join foreign-going ships departing from Indian ports.

2. Passport immigration stamps may be relied upon for seafarers who join ships at international ports and return via foreign locations, where CDC entries do not align with travel dates.

3. Service on foreign-flagged ships operating within Indian coastal waters should be treated as service within India for the purpose of determining residential status, irrespective of CDC entries.

A clear and uniform clarification on the above points will greatly assist in ensuring consistent

treatment, reducing uncertainty for seafarers, and promoting smoother compliance.

Suggestion for Clarification of Rule 126 of the Income Tax Rules – Seafarers’ Period of Stay Outside India

Background and Key Issues

Currently, Rule 126 defines an “eligible voyage” as one that either originates from a port in India and ends at a foreign port, or vice versa. However, it does not clearly specify whether the entire duration of a seafarer’s contract aboard such a vessel qualifies as stay “outside

India” for tax purposes—particularly when only one international voyage is undertaken during the contractual period. This lack of clarity has led to considerable uncertainty for many Indian seafarers.

Seafarers often rely on practical factors such as:

• Serving on foreign-flagged ships

• Having their CDC marked as foreign-going

• Receiving salaries in foreign currency credited to NRE accounts

to determine their residential status in good faith. However, due to the current ambiguity in the rule, the risk of misinterpretation and unintentional non-compliance remains high. Additionally, there is confusion around the tax treatment of service on foreign-flagged ships operating only between Indian ports. In such cases, even though the vessel may be foreign-owned, the voyages are confined to Indian waters, raising questions about whether the period

should be considered as stay in India or abroad.

Suggestions

1. Clarification on Contract Duration: Kindly consider amending Rule 126 to state that the entire period of service on a foreign-going vessel may be treated as stay outside India, even if the ship undertakes only one eligible international voyage during the contract.

2. Treatment of Coastal Voyages: It would be helpful to explicitly mention that time spent on vessels, even if foreign-flagged, will be treated as stay within India if the voyages are confined solely to Indian ports.

3. Simplified Language: We request that the rule be redrafted in simpler, more accessible language, to ensure that seafarers, many of whom are not familiar with legal or tax terminology, can accurately determine their residential status and obligations.

These clarifications would greatly aid in ensuring fair and consistent tax treatment, reduce

compliance challenges, and support the maritime workforce that proudly represents India

across global waters.

A Call for Fairness and Practical Reform

The Tax Harbour Team believes that these focused reforms can significantly ease the tax compliance burden for Indian seafarers, enhance clarity, and encourage greater voluntary compliance.

We remain committed to advocating for those navigating uncertain waters, both on the seas and in the world of tax. If you are a seafarer or represent someone in the maritime sector, stay tuned to Tax Harbour for more insights and updates.

~ Team Tax Harbour