Officials dismiss suggestion of an impending tax on Indian remittances
As an Indian immigrant whose family still resides there, your ability to send money to India is likely a major aspect of your life, as it may be their primary form of income to use for daily expenses. That said, you were probably frustrated to hear the reports indicating that Indian officials were planning on taxing non-resident Indians for the remittances they sent home.
But according to multiple news reports, any suggestion that a tax will be imposed is inaccurate.
In recent days, rumors had been swirling that Indians who were working overseas would soon be issued a tax levy of nearly 12.40 percent when they transfer money abroad. The speculation took on a life of its own when it was reported that Indian officials were mulling whether or not they wanted to implement the tax soon or impose them at a later date.
These speculations came to a grinding halt, however, when India's prime minister, Manmohan Singh, was informed of them.
"Prime Minister [Singh] has dismissed reports that the government is planning to charge 12.36 per cent on all foreign remittances to India," said Oommen Chandy, Kerela chief minister, recently told reporters. "He has assured status quo on the service tax issue."
Reports indicate that officials within the Indian government had discussed the possibility of installing a tax on foreign remittances as a means of boosting India's economy. Experts, however, were quick to cite that the tax would likely do more harm than good and could wind up impacting millions of Indians working abroad.
Bikram Singh Majithia, affairs minister for non-resident Indians, told reporters that the move would send mixed signals to expatriates.
"On one hand, we are luring NRIs to invest in [the] country and become part of India's economic growth," said Majithia. "The service tax on remittances by them to their parent country would discourage them to help [the] country with their remittance."
According to World Bank data, India is the world's largest recipient of foreign remittances, as approximately $64 billion worth were sent last year alone.
Despite the considerable amount of revenue from Indians and other people who send money online, India's economy has yet to take off. The World Bank says that India's gross domestic product – which is the total value of goods and service produced in a given year – slowed.
World Bank experts say one of the reasons why India's economic is lagging largely relates to a lack of infrastructure, particularly road development. In addition, strict rules and regulations imposed by the government have discouraged private investment, preventing the country from obtaining some of the financial means to kickstart its economy.