Logistics

Covid-19 impact: Seafarers on shore may lose NRI status as crew change drags

P Manoj Mumbai | Updated on June 13, 2020 Published on June 13, 2020

Seafarers onboard the SpiceJet flight to Doha (File photo)

Seafarers are staring at a collateral damage as an unending delay in replacing those working overseas on board ships much beyond their original contract tenures due to the pandemic induced restrictions, robs the chances of thousands waiting on shore in India for their next assignment and by default their tax-free status.

Currently, to qualify for non-resident Indian (NRI) status, like any other citizen of India, a seafarer has to stay outside India for 184 days or six months in a year. Consequently, his entire foreign income is not subjected to tax.

There are hundreds of thousands of seafarers who are anxiously waiting to join ships after coming onshore as far back as July last year on completing their previous assignment. A few months break for them was about to end when they were called to join ships in December/January. But, as the joining formalities were underway, the pandemic struck, halting all crew changes, mainly due to stoppage of international flights to and from India, a key part of the crew rotation logistics.

As a result, thousands of seafarers have worked outside India for less than 184 days in the financial year 2019-20.

“Those seafarers are at risk of losing their non-resident Indian (NRI) status,” said Abdulgani Serang, general secretary-cum-treasurer of the National Union of Seafarers of India (NUSI), which represents general purpose staff working on board ships.

This explains the eagerness of hundreds of thousands of seafarers to join ships as early as possible to earn.

“The delay in carrying out crew change expeditiously will cost us dearly,” said a third engineer who joined a ship on Friday after coming on shore in July last year.

“The NRI status is an annual affair,” said a Kolkata-based chief officer waiting for his next contract after signing off from his last contract in November last year. “Every year, we have to maintain that status by staying 184 days out of India. Otherwise, we lose our NRI status and the continuity breaks,” he said.

“The lack of income will pinch ratings (general purpose staff) on board more,” said a top executive with a ship management company.

The collateral damage to seafarers comes at a time when the seafaring community is yet to come to terms with a Budget announcement on taxation of NRIs.

Tax on NRIs

Finance Minister Nirmala Sitharaman’s February 1 announcement meant that a seafarer will have to spend more time outside India – eight months or 240 days instead of the existing 184 days – to qualify for NRI status and enjoy tax-free salary. This is considered difficult for seafarers to accomplish given that the typical on-board contract ranges between 4 and 7 months.

Even if they work outside India for 240 days by doing two contracts in a year to comply with the new rules and qualify for NRI status, if they don’t pay tax in the country or jurisdiction where they are NRIs, then the entire income earned outside will be taxed in India.

Seafarers are a floating workforce, unlike land-based jobs. They don’t have any country of residence. Today, they are in Houston and after a few days in Amsterdam. They are floating at sea and don’t have any state and hence are not required to pay tax in any country overseas.

“But, due to the new rules, it can be construed that we don’t pay tax in any other country being floating population and hence will have to pay tax in India,” a seafarer said.

While seafarers through their unions have urged the government to roll-back the announcement, it is not clear whether the Finance Bill passed by Parliament on March 23 have accepted the request or not. The Ministry is yet to come out with a notification in this regard.

Published on June 13, 2020
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