Income Tax Liabilities For Merchant Navy Officers

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arpit.saxena@yahoo.in (Querist)
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27 February 2011 Good Day,

I am a newly employed Officer in Merchant navy. I am employed on Foreign Ships, in a Foreign company, and spend more than half the year outside India, every year.
I still havent applied for a PAN number. Also havent started filing IT returns.
Now I already know that I am not liable to pay Income Tax, or file an IT return.
Please tell me, if I purachase any property(plot) in India then will I be liable to file IT return, or pay any taxes. The property in question is non rental.
Also please clarify, whether any money which I gift to my Father or Mother, is taxable for them? If not then what are the proeedures for gifting this money in writing.

Thanks and Best Regards
A. Saxena

prasad

prasad (Expert)
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01 March 2011 from the query it appears that you are citizen of India. So, first apply for PAN.
Secondly, in any previous year if you are outside Indian Territory for more than 182 days or more you will be treated as NRI and hence your income earned from Foreign company will not be taxed in India.
You can purchase plot in India. But its better to file the Income Tax returns.

arpit.saxena@yahoo.in

arpit.saxena@yahoo.in (Querist)
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02 March 2011 Gooday,

Thanks for the prompt response to my query, however please clarify further.
I have been a NRI for the past 4 years(during my training) and will be so during the coming years.
So now is it mandatory for me to obtain a PAN number and file IT returns annualy?
Also please respond to the part about "gifting money to my parents" part of my orginal query.

Thanks and best regards,
A. Saxena

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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31 July 2024 Here’s a detailed breakdown of the issues related to income tax for Merchant Navy officers and the process for gifting money:

### **1. Income Tax Filing and PAN Requirement:**

**a. Income Tax Filing:**
Since you spend more than half of the year outside India and are employed on foreign ships, your income is likely to be classified as foreign income. As per the Indian tax laws, if you qualify as a Non-Resident Indian (NRI) under the Income Tax Act, you are generally not required to pay Indian income tax on your foreign income.

However, you must consider the following:

- **PAN Requirement:** Even if you are an NRI, it is advisable to obtain a PAN (Permanent Account Number) for various financial transactions in India, such as buying property, opening a bank account, etc. While you may not need to file an income tax return in India if your foreign income is not taxable, having a PAN is useful and sometimes necessary.

- **Property Purchase:** If you purchase property in India, you will need to obtain a PAN. The PAN is required for the property transaction and for compliance with tax regulations, even if you are not earning rental income from it. The purchase itself does not necessitate filing a return unless there are other sources of income in India or if the property transaction requires tax reporting.

### **2. Tax on Gift Money:**

**a. Gifting Money to Parents:**
In India, gifts made to close relatives (such as parents) are generally not taxable in the hands of the recipient. Here’s how it works:

- **Taxability:** Gifts received from a relative are not taxable under Section 56(2) of the Income Tax Act. Close relatives include parents, siblings, spouse, etc.

- **Documentation:** While there is no formal requirement for documenting the gift in terms of a legal agreement, it is good practice to keep a record of the transaction. You can do this by:
- Issuing a formal letter or gift deed stating the amount of money gifted, the relationship, and the purpose.
- Maintaining bank statements or transaction records showing the transfer of money.

**b. Procedure for Gifting Money:**
- **Write a Gift Deed:** Although not mandatory, it is advisable to create a simple gift deed. This deed should include:
- Names of the donor and recipient.
- Amount of the gift.
- Date of the gift.
- A declaration that the gift is voluntary and without any consideration.

- **Transfer Method:** The transfer should be made through banking channels such as an electronic transfer (NEFT, RTGS) or a cheque.

### **3. Filing Returns and Compliance:**

**a. Filing Returns:**
- **When Required:** If you have other sources of income in India or if the total income (including interest from Indian bank accounts) crosses the basic exemption limit, you might need to file an income tax return.
- **PAN:** Having a PAN is necessary for various financial transactions and compliance, even if you are not required to file a return annually.

**b. Clarification:**
- **NRI Status:** As an NRI, you generally do not have to file an Indian tax return if your income is solely from foreign sources and does not exceed the exemption limits.

### **Summary:**
1. **PAN Number:** Obtain a PAN for financial transactions in India.
2. **Property Purchase:** While buying property does not require you to file a return unless there are other taxable incomes, having a PAN is essential.
3. **Gifting Money:** Gifts to parents are not taxable for them; maintain a record of the transaction.

For specific advice tailored to your unique situation, consulting with a tax professional or financial advisor might be beneficial.