There has been a great deal of concern since the announcement in March by the Kolkata bench of the I T Appellate that seafarers on foreign owned ships would be liable to pay tax on a receipt basis if the employer was instructed by the seafarer to remit the salary to their NRE (non resident exemption) account in India.
This announcement had the potential to effect 130,000 Indian Seafarers working abroad receiving around $40 million annually. It was even speculated that the decision could cause a drop in the value of the nation’s currency.
It was with great relief that the Central Board of Direct Taxes stated in their April 11 circular that “It his 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 (taxable) income merely because the said salary has been credited in the NRE account maintained with an Indian bank by the seafarer.”
India provides around 30% of staff in the cruise sector globally and the figure is higher still for the merchant navy sector – the above clarification therefore will have come as a welcome relief to a very significant chunk of the shipping industry.