Tuesday, 16 November 2010
So, are you an NRI, or what?
Here's a quick article I did for Sailor Today on tax-free status . . . and even more relevant now than ever before. Please do visit and ask your tax consultant for more . . .
The issue of a review in NRI status from, broadly, not more than 6 months a year to 2 months a year, has caused great debate and worry with seafarers - both present, prospective and past. And rightly so. This is one of the most widely misunderstood and misinterpreted aspects of Income Tax in India, which is one reason why the new Direct Tax Code (DTC) is trying to address that too. Many will now have to rework startegies.
Interim, here are a few basic observation, issued in best interest but without guarantee. Please do consult your own taxation entities for any decision you wish to take pertaining to fiduciary issues.
1) The new DTC will come into effect from the 1st of April 2012. Likely. Maybe, but at the same time, maybe earlier, maybe later. This remains to be seen.
2) The present dispensation of not more than 6 months in a year is water-tight. Not really, it comes with a few ryders and conditions, some extremely complex.
3) To be on the safe side, stay out of the country on a foreign flag ship for atleast 190 days. Apparently, that's not enough, and here are some queries being raised:-
# Did the ship in question visit India or enter territorial waters/Economic Zone at any time. That's 200 miles.
# Did the NRI sign an agreement with any entity/company/agent in India. If he did, how was he an "NRI"?
# Did the seafarer get "control" of the money in India? (Means - where was the bank account)
# Did the seafarer NRI exceed 365 days in India in total in the last 3-4 financial years.
# Where was his place of residence while an NRI. Ship was place of work. Explain the issue.
This is not something that SAILOR TODAY concurs with, or supports - but we would not be doing our job if we did not bring this to your notice. As for the Income Tax Authorities, their focus is clear - incremental taxation from any source is their aim.
Complicated days ahead for NRI seafarers unless something is done, and soon. Otherwise, the best advice we can give you is - proceed with caution.