Hey Seafarers 👋
It is time to say goodbye to the old complicated Income Tax Act and welcome the much awaited Direct Tax Code, 2025. As Seafarers' preferred tax partner, SeafarersTax.Org is always one step ahead when it comes to keeping you updated about changes in tax laws of India.
Let us now dive into everything you need to know about Direct Tax Code, 2025.
❓ What is Direct Tax Code, 2025?
Direct Tax Code is a step forward to make the present Income Tax Act simplified, easy to read and understand. The present Income Tax Act consists of complex words entangled in numerous sections and rules, multiple deductions and exemptions making it challenging to understand for the taxpayers in India.
DTC 2025 will simplify and standardize the current complex Income Tax Act for all. The primary aim of DTC 2025 is to make tax compliance easy for every one including Seafarers.
DTC can be in the form of a new code altogether or it can be implemented by amending the present Income Tax Law. It is expected that DTC will be proposed during the February 2025 budget session by the Hon'ble Finance Minister of India.
❓ Will there by any change in NRE days (i.e. days outside India) for Seafarers in Direct Tax Code, 2025?
DTC 2025 will bring simplified residence rule for Seafarers. The present Income Tax Act has different tax implications for residents, residents but not ordinary residents (RNOR), and non-residents Indians (NRI), which creates confusion amongst the Seafarers about the taxability of income earned.
Residential status of Seafarers in the proposed DTC 2025 will be classified as either residents or non-residents, eliminating the RNOR (Resident but Not Ordinarily Resident) category.
Further, in order to bring more individuals in tax bracket, rumors have been surfacing around that the NRE days (i.e. days outside India) may be increased to 240 days (instead of 184 days) in a financial year in the new Direct Tax Code, 2025. If the NRE days are increased, it will be difficult for many Indian Seafarers to maintain their NRI status and ultimately, many seafarers may end up paying taxes.
Team SeafarersTax.Org is in direct touch with various Income Tax Officials and DTC,2025 draft committee members to address this issue particularly from Seafarers perspective.
❓ What are other significant changes in the Direct Tax Code, 2025?
DTC will remove the terms “Assessment Year” and “Previous Year”. Only the term “Financial Year” will be applicable for tax filing purposes for all the Seafarers.
Capital gains will be taxed as regular income. Short-term gains on financial assets will be taxed at 20% (i,e. up from 15%), while long-term gains will be taxed at 12.5% (i.e. down from 20%).
“Income from Salary” will be known as “Employment Income,” and “Income from Other Sources” will be known as “Income from Residuary Sources.”
Most deductions and exemptions will be removed from the new DTC 2025.
Conclusion
The introduction of the Direct Tax Code can be considered as one of the significant step towards replacing the old and complicated Income Tax Act. Further, the transition of Seafarers to the new tax code will involve careful management at different levels and discussions with ship owners and RPSLs. In our view, Direct Tax Code may outweigh many problems in the long run which are presently faced by the Seafarers under the existing Income Tax Act.
