For decades, Indian seafarers sailing across international shipping corridors were embroiled in relentless litigation with the Income Tax Department over whether days spent navigating Indian territorial waters (within 12 nautical miles) counted as days inside India. This uncertainty came to a decisive end with the introduction of Rule 126 into the Income-tax Rules, 1962.
The Statutory Framework: CBDT Notification No. 70/2015
Introduced via CBDT Notification No. 70/2015 dated August 17, 2015, Rule 126 provides a simple, objective, and documentary basis for calculating the period of stay outside India for an Indian citizen who is a member of the crew of a ship.
Key Principles of Rule 126 Arithmetic
- Both Sign-on and Sign-off Dates Count: Unlike regular air travel day counting under Section 6 where arrival and departure rules can be contentious, Rule 126 explicitly counts both the day you step on board and the day you step off as days outside India.
- Eligible Voyage Definition: The voyage must be an eligible voyage that originates from a port in India to a port outside India, or between ports outside India.
- CDC is Paramount: The primary evidence recognized by the Income Tax Appellate Tribunal (ITAT) and Assessing Officers is the Continuous Discharge Certificate (CDC). Passports immigration stamps serve as corroborative records.
Why Accurate Day Counting Matters
Under Section 6(1) of the Income-tax Act, if an Indian citizen crew member spends 182 days or more outside India during the financial year (April 1 to March 31), their tax residency status becomes Non-Resident (NRI). Once this status is locked, foreign salary remitted into your NRE account is 100% tax-exempt in India under Section 10(4)(ii).
For officers managing multiple contracts, port leaves, and multi-year tracking, using an automated day counting solution like NRI Track ensures that you never miss your threshold by a single inadvertent day.