My client is a non-resident seafarer and his foreign employer credits his salary straight into his Indian NRE account. Is that receipt in India?
No. The Board clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship is not included in total income merely because it has been credited to an NRE account maintained with an Indian bank. Under s.5(2)(a) only income received or deemed to be received in India is taxable for a non-resident, and the Board treats the credit into the NRE account as not making the salary income received in India.
Decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Foreign Tax & Tax Research Division, FT&TR-V Division — signed by Subash Jangala, Under Secretary (FT&TR-V)) on 2017-04-11, reported as Circular No. 13/2017 dated 11 April 2017. It bears on section 5(2), section 5(2)(a), section 6, section 6(1) of the Income Tax Act 1961, in Residence & Treaty Benefit and Salary & Perquisites matters.
This is one of the most common notice situations for anyone with merchant navy clients, because the credit to the Indian account is visible in the AIS and the salary is not visible anywhere else. The circular is the shortest answer to it and, being a Board circular, binds the officer. It is also the departmental foundation for the Calcutta High Court's decision in Sumana Bandyopadhyay, which reached the same result on the statute.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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The Board recorded that representations had been received that salary received by non-resident seafarers for services rendered outside India on board foreign ships was being subjected to tax in India, on the ground that the salary had been received into an NRE bank account maintained in India by the seafarer. The issue was therefore not whether the seafarer was a non-resident, nor where the services were rendered, but whether the credit of the money into an Indian bank account made the income received in India for the purposes of s.5(2)(a).
Salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because that salary has been credited in the NRE account maintained with an Indian bank by the seafarer.
The Board's reasoning is compressed into one sentence of statute and one of application. Section 5(2)(a) provides that only such income of a non-resident shall be subjected to tax in India as is either received or deemed to be received in India. The salary in question accrues outside India, because that is where the services are rendered and where the employer's obligation arises; the only Indian element is the bank credit. The Board treats that credit as insufficient to make the income received in India, so neither limb of s.5(2) is satisfied and the salary stays out of total income. The word 'merely' carries the limit of the clarification: the circular removes the NRE credit as a ground of charge, and leaves every other question — residential status, where the services were in fact rendered, the character of the vessel — to be established on the facts.
It is hereby clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the said salary has been credited in the NRE account maintained with an Indian bank by the seafarer.
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Handle my notice → Ask a CA on WhatsAppNo. The Board clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship is not included in total income merely because it has been credited to an NRE account maintained with an Indian bank. Under s.5(2)(a) only income received or deemed to be received in India is taxable for a non-resident, and the Board treats the credit into the NRE account as not making the salary income received in India. This was decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Foreign Tax & Tax Research Division, FT&TR-V Division — signed by Subash Jangala, Under Secretary (FT&TR-V)) and bears on section 5(2), section 5(2)(a), section 6, section 6(1) of the Income Tax Act 1961. It is reported as Circular No. 13/2017 dated 11 April 2017. This is one of the most common notice situations for anyone with merchant navy clients, because the credit to the Indian account is visible in the AIS and the salary is not visible anywhere else. The circular is the shortest answer to it and, being a Board circular, binds the officer. It is also the departmental foundation for the Calcutta High Court's decision in Sumana Bandyopadhyay, which reached the same result on the statute. If it applies to you, the first step is this: Establish non-residence for the year first with the passport record and, where the client is a crew member on an eligible voyage, the Continuous Discharge Certificate dates, since the circular does nothing for a resident.
The Board recorded that representations had been received that salary received by non-resident seafarers for services rendered outside India on board foreign ships was being subjected to tax in India, on the ground that the salary had been received into an NRE bank account maintained in India by the seafarer. The issue was therefore not whether the seafarer was a non-resident, nor where the services were rendered, but whether the credit of the money into an Indian bank account made the income received in India for the purposes of s.5(2)(a). The matter was decided on 2017-04-11 by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Foreign Tax & Tax Research Division, FT&TR-V Division — signed by Subash Jangala, Under Secretary (FT&TR-V)). On those facts the CBDT Circulars & Instructions held as follows. Salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because that salary has been credited in the NRE account maintained with an Indian bank by the seafarer.
The Board's reasoning is compressed into one sentence of statute and one of application. Section 5(2)(a) provides that only such income of a non-resident shall be subjected to tax in India as is either received or deemed to be received in India. The salary in question accrues outside India, because that is where the services are rendered and where the employer's obligation arises; the only Indian element is the bank credit. The Board treats that credit as insufficient to make the income received in India, so neither limb of s.5(2) is satisfied and the salary stays out of total income. The word 'merely' carries the limit of the clarification: the circular removes the NRE credit as a ground of charge, and leaves every other question — residential status, where the services were in fact rendered, the character of the vessel — to be established on the facts. In the words reproduced by the source cited on this page: "It is hereby clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the said salary has been credited in the NRE account maintained with an Indian bank by the seafarer."
It was decided by the CBDT Circulars & Instructions on 2017-04-11 and is reported as Circular No. 13/2017 dated 11 April 2017. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 5(2), section 5(2)(a), section 6, section 6(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because that salary has been credited in the NRE account maintained with an Indian bank by the seafarer. It arises in Residence & Treaty Benefit and Salary & Perquisites matters, on section 5(2), section 5(2)(a), section 6, section 6(1) of the Income Tax Act 1961, and was decided by Central Board of Direct Taxes, Foreign Tax & Tax Research Division, FT&TR-V Division — signed by Subash Jangala, Under Secretary (FT&TR-V). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Show that the services were rendered outside India on a foreign ship — the circular is worded for that fact pattern and not for coastal service or an Indian-flag vessel. Produce the employment contract and the wage account statement showing that the employer's payment obligation arose and was discharged abroad, and that the NRE credit is a remittance. Quote the circular in the reply rather than only citing it, and add Sumana Bandyopadhyay v. DDIT for the same proposition on the statute.
Still good law. No withdrawal or supersession was found. The Calcutta High Court in Sumana Bandyopadhyay v. DDIT, decided on 13 July 2017, reached the same conclusion on s.5(2)(a) and treated the circular as clarificatory. A Bombay Chartered Accountants' Society journal note fetched in searching records the benefit of the circular being applied by a tribunal even where the income was received in India for the first time; I did not fetch the underlying order and have not relied on it. That finding was checked against a published source, which is linked on this page, on 2026-08-20. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The circular is two paragraphs long and does exactly one thing. It does not say that an NRE credit is never a receipt in India — it addresses the specific case of salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship. It says nothing about a resident or a not-ordinarily-resident, nothing about a foreign-flag vessel in Indian coastal waters, and nothing about income other than salary. The F.No. is imperfectly reproduced on the page fetched — it reads as 500/07/2017-FT&TR-V but the characters are garbled in the text extraction — so verify it before quoting the file number. The existing corpus entry acit-v-nishant-kanodia-employment-abroad records this circular in its gaps field as a sourced item not then written up; this entry closes that. The circular does not deal with a seafarer who is resident or not ordinarily resident, with service on an Indian ship, or with a foreign-flag vessel operating in Indian coastal waters, all of which are live disputes. It does not address the interaction with Rule 126, which governs how a crew member's days in India are counted. It also says nothing about the Schedule FA and Black Money Act consequences of holding a foreign wage account, which are separate obligations that survive the salary being untaxed. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because that salary has been credited in the NRE account maintained with an Indian bank by the seafarer.
TaxSphere, “CBDT Circular 13/2017 on seafarer salary in an NRE account”, https://taxnotice.vittsphere.com/caselaw/case/cbdt-circular-13-2017-seafarer-nre-account/ (validity last checked 2026-08-20)
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