Tax on NRI remittances

Kerala resents Centre's decision to tax NRI remittances

 The Kerala government has expressed concerns over the Centre's decision to impose 12.36 per cent tax on commissions realised by financial institutions on NRI remittances. It would hit families who depend on their kin working in the Gulf and other nations.

Financial institutions, including money exchange firms, already charge a seven per cent commission on remittances. Now, the Central Board of Excise and Customs has issued a circular to realise 12.36 per cent tax on the commission.

They would ultimately pass this on to the account holders, which would mean double taxation.Nearly 90 per cent of Keralites working in the Gulf are engaged in low-end jobs and the money sent by them is the sole source of support for their families.

A similar proposal was made when the UPA was in power but it was withdrawn after Kerala Chief Minister intervened in the matter.

As per the figures of the State Level Banking Committee, non-resident Keralites sent a whopping Rs 95,000 crore last fiscal through banks and other institutions.

The new tax, which came into effect through a new circular from the Central Board of Excise and Customs (CBEC) would affect Kerala the most as remittances from NRKs account for nearly 35 per cent of the net domestic product of the state.

The NRI community which bailed out our country from forex crisis from time to time, deserved better treatment from the government. It is beyond doubt that the service tax levy would increase the cost of NRI remittance to India and ultimately the cost will be borne by the NRI population.

The government’s move to impose additional burden on NRIs runs completely against the stated stance of Reserve Bank of India (RBI)  that foreign remittances are export earnings (i.e. export of human resources). As per RBI handbook, NRI remittances account for 26.5 per cent of total export earnings. Significantly, companies get benefits amounting to 10-15 per cent of the export earnings that they receive under various schemes.
Government gives cash incentives and benefits to companies for bringing foreign exchange to India. When it comes to NRIs, no incentives, no benefits! If government is not ready to incentivise the NRIs, least they can do is not to penalise NRIs through an indirect service tax.