Income-Tax Notice to a Seafarer: When the Department Questions Your NRI Status or Your Salary

A seafarer’s return usually shows very little: no Indian salary, perhaps some NRO interest, a refund claim. The department’s data on the same person can show much more — large credits to an NRE account, fixed deposits, mutual fund purchases, a flat bought in the family’s name. When the two do not reconcile, the system asks a question. If nobody answers it properly, it becomes a demand.

The good news is that a seafarer who really was a non-resident and really worked on a foreign ship has a strong position in law. These cases are won or lost on documents.

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Why seafarers get notices

What the department sees	What it suspects
Large NRE credits, deposits or investments; no return, or a small one	Unreported income
Return claims non-resident; earlier years filed as resident, or nothing explains the change	Wrong status
Salary credits treated as received in India	Taxable salary
NRO interest and TDS, but income or refund claimed differently	A mismatch to adjust
Property or securities transactions in AIS	Capital gains not reported

None of these means the department is right. The data it holds is reported by banks, mutual funds and registrars without any knowledge of your status — an NRE deposit looks like any other deposit. The notice is an invitation to explain.

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What each notice is asking

Compliance-portal e-verification or “significant transactions” letters. Not a formal assessment. The department lists transactions it has on record and asks you to confirm them and say how they are reflected in your return. A clear response — “these are NRE credits of salary earned on a foreign ship while non-resident; return filed as non-resident; day count and CDC attached” — usually closes it.

143(1)(a) proposed adjustment. The processing centre proposes to add or disallow something — often income visible in AIS that the return does not show. You have 30 days to accept or disagree. For a seafarer, the usual answer is a reconciliation: which AIS entries are exempt (NRE interest), which are not income (salary credited to NRE for work abroad), and which were reported. See our 143(1) guide.

Scrutiny under 143(2), with a 142(1) questionnaire. The return has been selected for assessment and the officer asks for the basis of your status and your income. Expect requests for passport copies, CDC entries, contracts and the computation of days in India. This is where a prepared day-count matters most.

148A show-cause. The department believes income escaped assessment in an earlier year — typically salary it treats as received in India, or a status it does not accept — and asks why the year should not be reopened. The reply to the show-cause decides whether reassessment proceeds. See our 148A guide.

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The two arguments that decide most cases

1. You were a non-resident that year

Residential status is a count of days in India. For an Indian citizen employed abroad or serving as crew, it takes fewer than 182 days in India in the financial year — at least 184 days outside India in a normal year. For voyages that start or end at an Indian port, the period between the CDC sign-on and sign-off dates is not counted as days in India. The rules and the counting are in our income tax guide for seafarers; the days calculator produces the count.

Your reply should not just assert non-resident status. It should prove it: a day-by-day table for the year, each period tied to a CDC entry or a passport stamp, with the total days in India stated.

2. The salary was earned outside India, on a foreign ship

For a non-resident, only income received in India or accruing in India is taxable. CBDT Circular 13/2017 clarifies that salary accruing to a non-resident seafarer for services rendered outside India on a foreign ship is not included in total income merely because it is credited to an NRE account with an Indian bank. The Calcutta High Court held the same in Sumana Bandyopadhyay v. DDIT (2017).

The reply should show both halves: that the services were rendered outside India (contracts, CDC, ports), and that the ship was foreign-flagged. Salary on an Indian-flagged ship falls outside the circular and needs separate argument.

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The evidence pack

For each year in question:

• CDC pages with every sign-on and sign-off;
• passport pages with every Indian entry and exit (the e-passport travel history where stamps are missing);
• contracts or sign-on letters, with the employer, the ship’s name and flag, and the ports;
• wage slips and the matching NRE credits on bank statements;
• the day-count table, totalled, with the law applied;
• the return as filed, and AIS / 26AS for the year.

Assemble it once and keep it. Most seafarers who struggle in these cases are not wrong on the facts — they simply cannot reconstruct three-year-old contracts from memory while at sea.

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How we handle seafarer notices

We read the notice, rebuild the year from your CDC and passport, reconcile AIS line by line, and file a documented reply on the e-proceedings portal — all of it remotely, while you are on board if need be. Seafarers on our annual plan already have the day count and documents on file, so a reply takes days, not weeks. For notices generally, see our income-tax notice practice.

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Frequently Asked Questions

Why did a seafarer get an income-tax notice?

Usually because third-party data — NRE credits, deposits, mutual fund or property transactions — does not reconcile with a non-resident return, or because the department does not accept the non-resident status. Banks report transactions without knowing your status, so the notice asks you to explain them.

How does a seafarer prove NRI status to the income-tax department?

With a day-by-day count of days in India for the financial year, each period supported by CDC sign-on and sign-off entries or passport stamps, showing fewer than 182 days in India. Contracts and sign-on letters support the periods; the count should state the law applied.

Is salary credited to an NRE account taxable if the department says so?

Not for a non-resident working on a foreign ship. CBDT Circular 13/2017 clarifies that such salary, for services outside India, is not included in total income merely because it is credited to an NRE account, and the Calcutta High Court has held the same. If the seafarer was resident for the year, the salary is taxable.

What if I was actually resident that year?

Then correct the return rather than contest the notice — through a revised or updated return, or by accepting the adjustment — and manage interest and penalty. Voluntary correction before the department completes its action carries lower penalty exposure.

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Related reading

• Income tax for seafarers: NRI status, the 182-day rule and CDC dates
• FEMA for seafarers: NRE, NRO and FCNR accounts
• Missed the ITR deadline: belated vs updated return
• Income Tax Notice Reply & Representation