How Rule 126 Protects Indian Seafarers
Prior to 2015, Indian seafarers serving on foreign-going Indian ships faced immense tax disputes because tax authorities argued that vessels in Indian territorial waters (within 12 nautical miles) were inside India.
The Central Board of Direct Taxes amended the Income-tax Rules by inserting Rule 126. Under this historic rule, the period outside India for an Indian citizen crew member of a ship is calculated simply based on CDC entries:
The period beginning on the date entered into the Continuous Discharge Certificate in respect of joining the ship (Sign-on) and ending on the date entered in the CDC in respect of leaving the ship (Sign-off) is deemed outside India.
Unlike general air travel where arrival and departure days may be debated, Rule 126 explicitly counts both the Sign-On day and Sign-Off day as days outside India.
182-Day Statutory Threshold Breakdown
| Criteria | Non-Resident (NRI) | Resident Indian |
|---|---|---|
| Days Outside India | 182 Days or More | 181 Days or Fewer |
| Foreign Vessel Salary | 100% Tax-Free in India | Taxable at Indian Slab Rates |
| Indian Bank Remittance | Remit directly to NRE Account | Must convert to Resident Account |
| Required ITR Form | ITR-2 (Mandatory) | ITR-1 / ITR-2 |
