NRI Status for Seafarers (India) for the Current Year (FY 20-21 | AY 21-22)
Posted on December 17 2020
(FY 20-21 | AY 21-22)
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NRI Status for Seafarers (India) for the Current Year (FY 20-21 | AY 21-22)
[Super Bonanza for Seafarers, in FY 20-21 ! NO TAX* on overseas Income, even if you DONOT meet your NRI Status! (*TnC Apply)]
Seems the COVID and all the challenges Seafarers face, can partly be offset a little, by, NO TAX on Overseas Income, even if you donot meet the NRI Status.
As many Seafarers are facing problems due to Covid related travel issues and slowing global economy, we assume, quite a few Seafarers will not be able to meet the standard NRI Status requirements.
Moreover, there was some exemption provided by Government for FY 19-20, but no such exemption has been released for FY 20-21, and this makes calculating the NRI Status, a complete shot in the dark.
We receive many calls every day, where Clients enquire about the NRI Status calculation and accordingly plan, the sign-on and sign-off days, and we have been trying to assist the Seafaring community, as far as possible, in whatever small way possible.
Now you can relax, as we explain to you how you DONOT need to pay any Tax, at all, on your overseas Income in India, even if you have not met your NRI Status for FY 20-21 (as per current laws).
We assume, you are aware that there is a change in the definition of an NRI Status for FY 20-21.
As per the prevalent laws, please note the following points (few points may be obvious, but to maintain the flow of decision making, even the obvious is listed):
- There are 3 Residential Status’: Resident (ROR); Non-Resident (NRI); Not Ordinary Resident (NOR).
- NRI : No Tax on Overseas Income
- NOR : No Tax on Overseas Income (unless controlled from India)
- RES : Full Tax on Overseas Income (with DTAA benefits)
Hence the objective is to qualify as an NRI or as a NOR and you are home.
- You should calculate how many days are you in India, rather than counting the number of days outside India.
- NRI Test : The First Test
- If a Seafarer/NRI, is in India for 182 days or more, then the Seafarer/NRI will be considered a Resident (ROR), but subject to another test, called the NOR Test & the Income Test [In general : In case a Seafarer/NRI is in India for less than 182 days then the Seafarer/NRI will be considered a Non Resident (NRI)]
- If a Seafarer/NRI, is in India for 120 days or more and less than 182 days, then the Seafarer/NRI will be considered a Resident (NRI), but subject to another test, called the Income Test.
- NOR Test:
- If a Seafarer/NRI, has been an NRI for 9 years out of the preceding 10 years, then the Seafarer/NRI will be considered a Not Ordinary Resident (NOR); OR
- If a Seafarer/NRI, is in India for 729 days or less in the preceding 7 years, then the Seafarer/NRI will be considered a Not Ordinary Resident (NOR).
This is the general laws applicable. However if you have an Income in India of more than Rs 15 laks, in FY 20-21, then everything changes.
NRI Status for FY 20-21 for the NRI’s/Seafarer! How NOT to pay Tax in India even of you have NOT met the NRI Status for FY 20-21? (The magic of NOR Status, that you NEED to know).
- Income Test :
- If a Seafarer/NRI, has an Income from India of more than Rs 15 laks AND
- If a Seafarer/NRI is NOT Tax resident in any other Country, then he will be considered to be a Not Ordinary Resident (NOR).
Now comes the EUREKA moment! (being explained with an example for better understanding)
Situation 1: If you are a Seafarer and have NOT maintained you NRI Status (181 days rule), then you are (in general) liable to pay Tax for your sailing income in India at 30% in most cases.
Hence, assume Captain Fernandez has a sailing income of Rs 50 laks for the year FY 20-21. If he is a Resident Indian, and not able to maintain his NRI Status, then, he will need to pay Tax of Rs 15 laks (not taking into account interest penalty for delayed tax payment).
Situation 2 (Eureka): Now consider, in the same year, he has Rs 15 lakh income in India, then you will automatically be considered a NOR, where there will be Tax applicable on the Rs 15 laks income from India (ie: Rs 4.5 laks), but there will No Tax on the Rs 50 laks earned from overseas, as a Seafarer is not tax resident in any other country.
Hence, by having an extra Income from India of Rs 15 laks, Capt Fernandez has just reduced his tax liability from Rs 15 laks to Rs 4.5 laks (in the year in which Capt Fernandez has become a Resident).
Hence, in general, you are going to be reducing your Tax burden by increasing your Income.
This is the law, as applicable and as it reads, for Seafarers in particular, for FY 20-21. We just hope that the Government does not change this and Seafarers continue enjoying the special privilege and continue doing well for them-selves and for the country.
However, in the long-term it may make sense, to have an overseas account in Singapore, HK, UK or Jersey among others, and get your salary credited overseas, to avoid most tax litigations in India, due to the grey areas and interpretations of Indian tax laws.
Please do consult your Tax Advisor before taking any decision. This is a general article, and may or may not be applicable for you, as each of your Tax files is different from the other.
We have tried to put the basics out in the article. However, for a more detailed analysis you can follow the following link where the OLD NRI Status has been explained in details for FY 19-20 as well as the NEW NRI Status for NRI/Seafarer from FY 20-21.
(This is one of the most comprehensive articles available on the NEW NRI Status for FY 20-21, as on date)
Stay Safe & Secure.
Disclaimer: The opinion above, are as per the understanding of the Tax Laws, Compliances, & Circulars, supported by various Process Notes, Circulars and Case Laws and Years of experience of the Author. Please consult your Tax Advisor before taking any decision on this subject and article, because, the facts of each matter will be different and laws ‘may’ apply differently for each situation. The Article is just for a general explanation, to quell basic queries, doubts, the anxiety and rumours in the Cross Border community, including NRI’s, OCI, PIO’s, Expats, Seafarers, Professionals among others. Any loss or penalty or expenses of any nature whatsoever, will not be the liability of the Author or the Organisation.
Mr. Rohit Bajoria has more than two decades of experience in International & Cross Border Tax, NRI & Expat Tax, DTAA (Double Tax Avoidance), FEMA, Strategic Consulting, Asset Valuation, Accounting & Compliance, Banking & Financial Structuring, Cross Border Repatriation & Compliance among others. He has worked across the Country advising and assisting Global Clients, in various domains of Cross-Border Tax, Banking & Finance, across Industries in the MNC, Government & Non-Government segments.
He has gained a wealth of experience in International Tax & Compliance, Finance & Restructuring, Valuation, Credit Appraisals & other verticals in Tax, Compliance & Finance.
Currently, he is a Partner in Tax Assist (An Alfred Jordan initiative) and advises Clients located globally, on Cross Border Taxation & Compliance.
His other interests lie in writing articles in International & National Journals on Tax & Financial matters and he is working on a Book which is to be published soon. He frequently writes articles in Asean Affairs & other periodicals & magazines. He is actively involved with a few Orphanages and tries to support them actively. He can be reached on rohit@TaxAssist.in
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