The Direct Tax Code (DTC) 2025 is set to bring simplified tax laws for seafarers by introducing a clear and straightforward residency rule. Under the Income Tax Act, 1961, seafarers had to deal with complex residency classifications such as Resident, Resident but Not Ordinarily Resident (RNOR), and Non-Resident Indian (NRI), which created confusion regarding taxability of their foreign-earned income.
With DTC 2025, the government aims to remove ambiguities, making it easier for Indian seafarers to determine their tax status and liabilities.
Key Changes for Seafarers Under DTC 2025
1. Simplified Residency Rule
- The Direct Tax Code (DTC) 2025 will eliminate the RNOR (Resident but Not Ordinarily Resident) category, reducing confusion for seafarers.
- Seafarers will now fall into only two categories:
- Resident
- Non-Resident
- This simplification will help seafarers easily determine their tax liability based on the number of days spent in India.
2. Residential Status Based on Stay in India
- A seafarer will be considered Resident if they stay in India for 182 days or more in a financial year.
- If a seafarer stays in India for less than 182 days, they will be classified as a Non-Resident (NRI).
- This eliminates the confusion caused by the previous RNOR category.
3. Taxation of Foreign Income for Seafarers
Non-Resident (NRI) Seafarers:
- If a seafarer qualifies as an NRI, income earned outside India (salary from foreign shipping companies, offshore vessels, etc.) will not be taxed in India.
- Only income earned within India (such as rent from property, interest on bank deposits, etc.) will be taxed.
Resident Seafarers:
- If a seafarer qualifies as a Resident, their global income will be taxable in India, including salary earned on foreign ships.
4. Digital Compliance and Tax Filing
- Easier tax filing procedures for seafarers through online portals and digital compliance mechanisms.
- Introduction of automated tax calculations based on the number of days spent in India, reducing paperwork and manual errors.
How Does This Benefit Seafarers?
- Less Confusion – The removal of the RNOR category makes it easier for seafarers to determine their tax residency.
- Clear Tax Rules – Seafarers will only pay tax in India if classified as a Resident.
- No Double Taxation – Non-Resident seafarers will not be taxed in India on foreign earnings, preventing double taxation.
- Simplified Tax Filing – More efficient tax filing through digital platforms.
Conclusion
The Direct Tax Code (DTC) 2025 aims to bring clarity and fairness to the taxation of Indian seafarers. By removing complex residency rules and ensuring only Residents are taxed on global income, it provides a more transparent and predictable tax system for seafarers working on foreign ships.
This is a major positive step for India’s maritime workforce, ensuring better tax compliance with reduced hassles. 🚢💼