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 . . .

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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.

 

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How many people should we have on board ships??

I believe the Port State authorities in Spain and the US, and now to some extent Greece also, have recently as Port States started taking some interesting initiatives in placing their National interests first as far as safe manning onboard ships of other flags visiting their waters and ports/countries is concerned. I do not have the exact details, but have heard about how the number of watch-keepers, for example, has to be "better" if that from the flag state is at variance to what the port state expects.

There is no reason to not motivate the Indian Government to do so for all vessels calling Indian ports, also - we are not exactly minnows in the world of ocean trade either. Likewise, with some foresight, the same can be applied to ships entering Indian waters in their voyages worldwide - especially now that ships from the PG to the Far East as well as others tend to hug the Indian coast because of the Red Sea/Somalia piracy issues.

Just a thought - but worth pursuing. Or we keep our peace - Black Rose at Paradeep and similar not-withstanding. Volvo buses plying between Mumbai and Bangalore now have 4 drivers (2 for city at each end and 2 for the long haul) like do Suez Pilots - but at sea, we keep worrying about Indian seafarers becoming non-competitive?

As far as reduced manning is concerned - it is my submission that for the typical ship-owner/operator, human beings on board are certificates of competency that eat food, so the fewer the better. In the risk analysis of seaworthy in terms of documentation versus seaworthy in terms of actual facts, the cost of those lives is factored in - so the fewer the better. Barring the Derbyshire and maybe a few other cases, has anybody here heard of family or flag state pressing for investigations, lately?