How is a seafarer's income taxed?

I americium a seafarer and person stayed successful India for astir 135 days and worked connected an Indian-flag vessel for the remaining play (approximately 230 days) successful the past fiscal year. I person my wage successful NRE (non-resident external) account. In the past fiscal year, I sold immoderate portion of my ancestral onshore that was lying vacant for ₹77 lakh. The purchaser had deducted taxation astatine root portion making the payment. Will my income, which usually comprises wage and involvement income, beryllium taxed due to the fact that of the onshore merchantability during the year?

—Name withheld connected request

Being a seafarer, determination are definite concessions granted to you for determination of taxation residence successful India nether the Income Tax Act, 1961 (ITA). Since you person near Indian territory arsenic a unit subordinate connected an Indian-flag ship, you person to transverse the threshold of 182 days oregon much enactment successful India successful bid to suffice arsenic a taxation nonmigratory of India. In your case, since you person stayed successful India for lone 135 days during the erstwhile fiscal year, you volition not fulfill this trial and accordingly you volition not go a nonmigratory nether the mean provisions which find taxation residence connected the ground of play of enactment successful India.

However, the ITA has been amended since FY 2020-21 to supply for a deemed residence test. Under this test, adjacent if you suffice arsenic a non-resident (by taking into information that your play of enactment successful India is beneath the threshold of 182 days), you could inactive go a taxation nonmigratory of India if you are not liable to taxation successful immoderate different state and that you person Indian income exceeding ₹15 lakh for the peculiar fiscal twelvemonth successful question. In your case, isolated from the information that bash not suffice arsenic a nonmigratory based connected your play of enactment successful India, ordinarily you would not go a taxation nonmigratory of immoderate different state since you were moving on-board the vessel for remainder of the play erstwhile you were not contiguous successful India. Further, assuming that the superior gains income (after considering indexation) from merchantability of onshore exceeds ₹15 lakh, you volition go a deemed taxation nonmigratory of India nether this further test. 

For persons becoming deemed taxation nonmigratory of India, incomes which accrue extracurricular India (barring some) are not taxable successful India. Therefore, your wage earned from workout of employment successful planetary waters would not beryllium taxable successful India. Further, the Central Board of Direct Taxes (CBDT) has issued clarifications done circumstantial circulars that specified recognition of wage to NRE relationship would not marque it taxable successful India. However, since your ancestral onshore was situated successful India, superior gains earned by you connected its merchantability would stay taxable successful India.

Harshal Bhuta is spouse astatine P.R. Bhuta & Co. Chartered Accountants.

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Published: 06 May 2024, 05:54 PM IST