Income Tax for Merchant Navy Seafarers in India: NRI Status, Rule 126 and Filing Guide (AY 2026-27)

Few groups of Indian taxpayers face as much confusion as merchant navy seafarers. You spend most of the year outside Indian territorial waters, your employer may be registered in Singapore or Panama, your salary arrives in USD, and nobody at the shipping company files your return for you. The result is a lot of half-truths passed around on ship: "seafarers don't pay tax", "NRE credit means it's exempt", "185 days is the magic number".

Some of that is right. A lot of it is wrong in ways that produce notices two years later. This guide sets out how seafarer income is actually taxed for AY 2026-27 (FY 2025-26), how your sailing days are counted, and what you should file.

The One Thing That Decides Everything: Residential Status

There is no special "seafarer exemption" in the Income Tax Act. What seafarers actually benefit from is ordinary non-resident treatment: a Non-Resident is taxed in India only on income that accrues in India or is received in India.

So the entire question is whether you were a Non-Resident for FY 2025-26.

Under Section 6(1), you are a Resident if you were in India for 182 days or more in the financial year, or 60 days or more in the year plus 365 days or more across the preceding four years.

The second condition would catch almost every seafarer. It does not, because of an exception written specifically for people who leave India to work: for an Indian citizen who leaves India in any year as a member of the crew of an Indian ship, or for the purposes of employment outside India, the 60-day test is stretched to 182 days.

The practical rule for a seafarer is therefore simple to state and easy to get wrong:

If you were physically in India for 182 days or more during 1 April 2025 to 31 March 2026, you are a Resident. If you were in India for 181 days or fewer, you are a Non-Resident.

There is no separate 183-day or 185-day threshold. The number is 182, and it is counted for the financial year, not the calendar year.

For the general framework and the RNOR category, see our complete guide to residential status for income tax.

Rule 126: How Your Sailing Days Are Counted

Here is where seafarers get a rule of their own.

If you sail on a foreign ship, day counting is straightforward: the days you were physically outside India are days outside India. Your passport stamps and CDC do the work.

If you sail on an Indian ship, you may be within Indian jurisdiction on paper even while at sea. Rule 126 of the Income Tax Rules fixes this. For an eligible voyage, the period beginning on the date entered into your Continuous Discharge Certificate (CDC) as the date of joining the ship, and ending on the date entered as the date of signing off, is not counted as a period of stay in India.

An eligible voyage is a voyage by a ship carrying passengers or freight in international traffic where:

• for an outward voyage, it originates at a port in India and has a destination at a port outside India; or
• for an inward voyage, it originates at a port outside India and has a destination at a port in India.

Two consequences follow that seafarers routinely miss:

• Coastal voyages do not qualify. If your ship runs Kandla to Chennai, those days are days in India, however far offshore you were.
• Your CDC is the primary evidence. Sign-on and sign-off dates in the CDC, not your own diary of joining flights, decide the exclusion window.

Counting Example

Captain Rao joined a foreign-flag vessel on 12 May 2025 and signed off on 20 January 2026. He was in India from 1 April to 11 May (41 days), and from 21 January to 31 March (70 days).

Total days in India: 41 + 70 = 111 days. Under 182, so Captain Rao is a Non-Resident for FY 2025-26, and his overseas salary is outside the Indian tax net.

Now change one fact. He signs off on 15 October 2025 and stays home for the rest of the year. Days in India: 41 + 168 = 209 days. He is a Resident, and his entire year's salary — including the months at sea — becomes taxable in India.

That single sign-off date is worth several lakh rupees. Seafarers who are borderline should track the count through the year rather than discover it in July.

The NRE Account Myth, Corrected

The most persistent piece of ship's-mess tax advice is that salary is exempt because it lands in an NRE account.

The accurate version has two parts.

First, under Section 5(2), a non-resident is taxable on income received in India. If your employer pays your salary directly into an Indian savings or NRO account, that is arguably a receipt in India, and the salary can be taxed even though you earned it entirely at sea. This is the real trap — not the currency, not the flag, but the account the money first lands in.

Second, CBDT Circular No. 13/2017 clarified the position for NRE credits: salary accrued to a non-resident seafarer for services rendered outside India on a foreign-going ship shall not be included in total income merely because it is credited to an NRE account maintained with an Indian bank.

So the NRE account does not create an exemption. It preserves one that already exists because you were a non-resident earning outside India. If you are a Resident this year, an NRE credit saves you nothing.

Two related points:

• Interest on an NRE account is exempt under Section 10(4)(ii) only while you qualify as a person resident outside India under FEMA. Once you return for good, the account is redesignated and the interest becomes taxable.
• NRO account interest is fully taxable, with TDS deducted at 30% plus cess. Most seafarers over-pay here and never claim the refund.

What About Section 6(1A) Deemed Residency?

Since FY 2020-21, an Indian citizen whose total income from Indian sources exceeds Rs 15 lakh, and who is not liable to tax in any other country by reason of domicile or residence, is deemed to be a Resident — and classified as RNOR.

Seafarers hear about this and panic, because they genuinely are not tax-resident anywhere. But the provision has a threshold that most seafarers never cross: it applies only if your India-sourced income exceeds Rs 15 lakh. Overseas salary earned as a non-resident is not India-sourced income. Rent from a flat in Pune, capital gains on Indian shares, and NRO interest are.

If your Indian-sourced income for FY 2025-26 is, say, Rs 6 lakh of rent and interest, Section 6(1A) simply does not apply to you. If you own substantial Indian property or a large portfolio, it may — and it is worth checking before assuming non-resident status.

Filing: What a Seafarer Actually Reports

Being a Non-Resident does not mean you skip filing.

You must file an ITR for AY 2026-27 if your India-taxable income before deductions exceeds the basic exemption limit — Rs 4,00,000 under the default new regime for FY 2025-26. Non-residents are not eligible for the Section 87A rebate, so the effective nil-tax ceiling of Rs 12 lakh that resident salaried taxpayers enjoy does not apply to you. A non-resident with Rs 6 lakh of Indian rental income pays real tax on it.

There are also strong practical reasons to file even below the threshold: claiming back TDS on NRO interest, supporting visa and loan applications, and creating a documented record of your non-resident years.

Which ITR Form

Non-residents cannot use ITR-1 at all, regardless of how simple the income is. See our guide to choosing between ITR-1 and ITR-2 for the full comparison.

What Goes in the Return

• Residential status: select Non-Resident, and be prepared to support the day count.
• Overseas salary: a non-resident does not report foreign salary as taxable income. Many seafarers report it under "Exempt Income" for disclosure; this is a reasonable practice but it is disclosure, not a claim of exemption.
• Indian income: rent, NRO interest, dividends from Indian companies, capital gains on Indian shares and mutual funds — all reported normally.
• Schedule FA (foreign assets): applies to Residents, not to Non-Residents. If you were Resident this year and hold an overseas bank account tied to your ship's payroll, it must be disclosed.
• TDS credits: reconcile against Form 26AS and AIS before filing. NRO interest TDS at 30% is the single most common refund a seafarer leaves unclaimed. Our post on Form 26AS, AIS and TIS explains how to read them.

49Tax can pull your Form 26AS and AIS data automatically and reconcile the TDS on your NRO interest against what the bank actually reported, which is usually where the mismatch hides.

Records to Keep

Residential status is the one thing an assessing officer will question, and the burden of proof is yours. Keep, for every financial year:

• CDC with all sign-on and sign-off entries
• Passport pages with immigration stamps for every entry into and exit from India
• Contract of employment and the ship's flag details
• Seafarer's Identity Document and, for Indian ships, evidence that the voyage was an eligible international voyage
• Bank statements showing where salary was first credited

A clean day-count worksheet, prepared while the year is running and backed by these documents, resolves in one reply a query that otherwise takes months.

The Takeaway

Work backwards from the day count. Before you accept your next sign-off date or extend shore leave, add up your days in India for the financial year and check where 182 sits. Then make sure your salary is credited to an NRE account rather than a resident or NRO account, keep your CDC and passport stamps filed year by year, and file ITR-2 to reclaim the TDS on your Indian interest income. The exemption is not a seafarer privilege — it is ordinary non-resident treatment, and it survives only as long as your records prove you earned it.