Seafarers’ dilemma

India’s oldest union of merchant navy officers, The Maritime Union of India (MUI), has sought an urgent intervention of the Shipping Ministry of India for enabling Indian seafarers qualify for the Non-Resident Indian (NRI) status for 2020-21. To qualify for NRI status, like any other citizen of India, an Indian seafarer too has to be outside India for 182 days, or six months in a year. Consequently, his entire income while abroad is not subject to tax by Indian income tax department.

“Problems such as crew changes from foreign ports and Covid-19 pandemic have posed a critical challenge for Indian seafarers, as far as their income and liability to pay income tax is concerned,” says Amar Singh Thakur, general secretary, MUI, in a letter submitted recently to the Shipping Ministry of India. “It is to be understood that, on the one hand, Indian seafarers serving on ships when major lockdowns were announced worldwide could not be brought home. On the other hand, those seafarers who were waiting to join or were on leave could not join ships to replace those returning home. As a result of this dual challenge, the seafarers on shore have not been in a position to fulfil the officially declared criteria of working outside India for more than 182 days in a year to qualify as NRI”.

The letter further calls attention to the fact that the prime asset of the merchant shipping industry are the seafarers, who continue to work without interruption even when all other modes of transport and most businesses have ceased work during the ongoing pandemic. “Seafarers continue to provide essential goods all around the globe, working onboard ships, away from their families, who have to face challenges all alone at home. Seafarers have always brought valuable foreign exchange to our country. This issue has already badly affected employment prospects and it appears this will continue to do so in the coming months. In order to improve the morale of our seafarers, we seriously need to be fair to them and grant exemption from income tax for 2020-21, since the pandemic continues to hamper their jobs.”

High tax burden

Therefore, MUI would like to appeal to the Ministry of Shipping to acknowledge this issue and ensure that an appropriate circular to exempt those Indian seafarers, who are not in a position to qualify as NRIs for no fault of theirs, be issued forthwith. “The entire shipping industry in India is in agreement with our sentiment,” the letter states. “And, we are certain that our appeal is the given urgent attention in the interest of Indian seafarers. I met senior officials of the Shipping Ministry in New Delhi and was assured full co-operation by the administration,” informs Thakur.

“The officials said that they had forwarded the letter to the Ministry of Finance, with a request to do the needful at the earliest.” In the letter submitted to the Shipping Ministry, MUI has also made a mention to a clarification issued by the Central Board of Direct Taxes on 8 May 2020 in respect of residency under Section 6 of the Income-Tax Act 1961.  Also, countries like the Philippines and Ukraine, which compete with India for global share of seafarers, do not levy high income taxes on their seafaring citizens.”

Currently over 130,000 Indian seafarers work aboard specialised cargo vessels world-wide and tax-free income has always been an added attraction for these Indian merchant navy workforce, which contributes about $50 million annually to our country’s exchequer. The global share of Indian seafarers is about 7 per cent at present.

Interestingly, a judgment delivered by the Kolkata income tax tribunal in August 2016 had mandated that Indian merchant navy workforce should pay taxes in India. This ruling then had shattered the morale of Indian seafarers. Upon the timely intervention by the Maritime Union of India, Indian seafarers got tax exemption from the Ministry of Finance, as it subsequently issued a clarification regarding the liability to income-tax in India for a non-resident seafarer receiving remuneration in NRE (non-resident external) account maintained with an Indian bank.

Headquartered in Mumbai, The Maritime Union of India represents Indian merchant navy officers. The union is affiliated to the London-based the International Transport Workers’ Federation, which is a democratic, affiliate-led federation, recognised as the world’s leading transport authority. ITF works passionately to improve working lives, connecting nearly 700 affiliated trade unions from 150 countries and represents nearly 20 million working men and women across the world.