As we know mariners may have to sail for months at a stretch. This is a very demanding job though with good returns financially speaking. Yet do you know what is the tax slab for mariners. We have tried to explain the tax liability of mariners in very simple and common language without the use of any technical or legal jargon usually associated with such stuff.
Before proceeding further I must state that this applies mainly to citizens of India who are sailing on foreign flag ships. This is not a general article covering all mariners as tax laws are pretty different and complicated so cannot be generalized. Over time we will be putting tax related information for other countries as well.
The tax laws of India say that if you are not residing in the country for less than one hundred and eighty days in a financial year, you cannot be taxed under the law of the country. Hence a mariner has to ensure that he spends at least six months on a ship. That means he is not staying in the country for a little more than one hundred and eighty days, so that he cannot be covered by the tax laws of the country. Such a person is considered a non-resident of the country. A non-resident cannot be taxed as per the law of India for any income accrued outside India.
Most of the mariners spend at least six to nine months on a ship, away from family and their country and this is exactly why they cannot be taxed as per the IT laws. As they are exempted from paying tax they escape the tax burden most of the time.
This point makes merchant navy a good career option. Most of the countries have very strict tax plans. This is exactly why people try to evade tax. In spite of getting much less salary compared to navy these people have to pay tax. It pinches a lot to give away your earned money as tax. Some may feel that it is unfair. However, you must consider the fact that the merchant mariners spend a good amount of time away from their families, so this can be considered as a motivation for them.
Almost all countries of the world have this tax law that a person who is not a resident of the country for a certain number of days will be exempted to pay tax. Most often, the seafarers are not paid for the time they spent at home, though that also depends from company to company and varies with ranks. Some companies might offer salary to employees when they are home.
The rule of 180 days was not meant for the merchant navy it was a general rule made for all the professionals. However, with merchant navy the rule becomes applicable as this is a profession where the employees need to spend so many months on the ship and away from family.
If the merchant mariner does not spend one hundred and eighty days on a ship then he will not be considered as a non-resident. In that case he will be taxed as per the tax law of the country. To avoid such situation most of the mariners prefer to spend at least six months a year on board unless there is a health or personal emergency.
The rule is the same for both sailors and officers. Another point that you must keep in mind is that these six months or one hundred and eighty days should be within the financial year and not calendar year. That means that in between 1st March to 31st April you have to be out of the country for one hundred and eighty days. It is not required that you are out of country at a stretch for these many days. You can go and come back any number of times just ensure that you stay away for these many days.
The merchant mariners should ensure that the salary is not credited in India. If the salary is credited in India or the country of their residence it will be taxed as per the tax laws of the country. The salary must be shown as a foreign remittance to get the benefit of tax exemption. Only foreign remittances are exempted from tax and not salaries. Well one important point that you must keep in mind is do file your returns even if the tax deducted is nil.
This is a government document and must is required if you are looking for a loan or any other legal formalities. This also proves how you are not evading tax. You can also do some tax saving investments for your future as saving is a good habit. The disadvantage is that in merchant navy you don’t have a pension or provident fund scheme. This is exactly why you should save enough for your old age by doing sound investments.
We hope you have got a good idea of merchant marine tax deductions and how they work. We hope these points will help you to understand the concept of merchant marine taxation better and help you to ensure that you can avail the benefits as a merchant mariner.