Panaji, April 13, 2017

Panaji: In a move that is expected to bring relief to seafarers, the central board of direct taxes (CBDT), which reports to the Union ministry of finance, has stated in a circular dated April 11 that the salary earned by an Indian working on a foreign vessel, or outside the country would not be liable to be taxed.

The circular comes after an income tax tribunal in Kolkata ruled that any income received in India or credited in a non-resident external bank account in India is taxable even though the employment was rendered outside the country.

“It is hereby clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income (taxable) merely because the said salary has been credited in the NRE account maintained with an Indian bank by the seafarer,” under secretary for foreign tax and tax research at CBDT Subhash Jangala said.

The Kolkata tribunal’s judgment in June had sparked fears across the shipping sector as it could have affected over one lakh seafarers across the country, especially in Goa and Kerala.

The shipping industry, especially merchant navy and cruise lines, hires a lot of Indian personnel because of their qualifications and willingness to work long hours.

India accounts for around 30% of the global staff for the international cruise sector, but the number is much higher in the merchant navy.

The Union government’s move comes after extensive deliberation and representation by the Maritime Union of India (MUI) and National Union of Seafarers of India (NUSI) before the central board of direct taxes and the department of revenue.

In August 2016, the income tax department began slapping notices on merchant navy personnel, asking them to pay taxes on income earned from working on either Indian or foreign vessels.

“Receipt of salary in bank account is only a mode of payment of salary, which is deemed to be received on month to month basis, and at the time of signing off. Merely because a contract is signed in India does not mean that income has accrued in India because income does not accrue on its signing, but on actual working on the ship,” a representative of MUI explained.

According to a senior official in the shipping sector, Goa and Kerala contribute the highest number of workers for the shipping sector. Around 40% of the crew, both technical and non-technical comes from Goa, said the official.

[The Times of India]