Never surprise if you hear such a news very soon. At present, there is no taxation for sending money to India by a Pravasi or an NRI through normal banking channels. The money send by a Pravasi or an NRI is considered as tax free.
Unfortunately, some media reports came this month that, Indian Government is planning to charge 12.36 per cent service tax on the fees paid by NRIs sending money to their country. This proposal was introduced indirectly in the Proposed Place of Provision of Service Rules.
This plan is very much surprising because, the countries where NRIs are living like western countries, they had to pay tax for the amount they earn at there itself. In Middle east countries, the Arabian Governments were very kind to avoid tax to the foreign nationals even in conditions like bad financial turmoil. Then, how an Indian Government can think about such a strange taxation system.
Who will suffer from taxation for NRI
Indian States such as Kerala, Tamil Nadu and Punjab are among the regions worldwide that do high volume of international remittance. The share of NRI remittance in the State’s net domestic revenue is 30% in Kerala, 13% in Punjab and 7% in Tamil Nadu etc.
A labor, or a professional working outside of India can never think about wiping of 12 percent of what they earn.
Dangers behind taxation for NRI
- Hawala or Black Money flow may grow
- Investment from NRI will go down
- Money will stay overseas due to various investment options for NRIs in other countries.
- NRI will stop sending money and possibility of a new culture of save money abroad will grow.
- A significant reduction in NRI money would reduce the disposable income of the dependents.
- Directly affect the growth of most Indian states.
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