India scraps plan to tax NRI remittances

Manama, July 15, 2012

A new tax on transaction fees to be paid by expatriates while remitting money to India has been scrapped, said a senior government official, adding that the rule will only affect transactions within the country.

The Gulf Daily News, our sister publication, had earlier reported that the Indian government was planning to impose a 12.36 per cent tax on all services with effect from July 1.

A government official had failed to rule out that service taxes would affect inward remittances.

The directorate of service tax director-general Sanghamitra Panda had told the GDN from Mumbai that India was adopting a negative list approach towards taxation from July 1.

However, the government has clarified that the taxes apply only to domestic transactions.

'There was some sort of miscommunication earlier saying there will be some charges but it won't affect international remittances coming from Bahrain, the Middle East, the US and the rest of the world,' said Bahrain Chapter of Institute of Chartered Accountants of India (BCICAI) chairman T D Balraj.

'It will only affect transactions within India,' he said.

The proposed move to impose service tax on transaction fees of remittances had raised concern amongst non-resident Indians in Bahrain.

The kingdom is home to around 300,000 Indians most of whom send money periodically to dependant families back home.

The new taxation policy caused fear that the actual amount of money remitted will be taxed. 'There are no plans to charge service taxes on remittances,' Balraj added.

'It will be continued as before. Even the tax on transaction fee is not being considered at all,' he said.

The BCICAI as well as Indian community leaders had petitioned the Indian government to reconsider its service tax policy.

'The government has clarified that inward remittances do not come under the service taxes ambit,' Balraj said.-TradeArabia News Service

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