India has decided not to tax remittances sent home, as a new Bill taxing money leaving the country came into effect.
Since October 1, a tax of 5% is being imposed on money remitted overseas from India, and non-resident Indians (NRIs) were worried about having to possibly pay taxes for money sent to the country.
Reassuring NRIs in Oman, Zachariah PS, the general manager for Musandam Exchange, an exchange house in the country, said this tax would not affect people waiting back home to receive funds from Oman and other countries.
There will be no impact on the money people send to India"
"There will be no impact on the money people send to India. This is a development that will only affect people sending money outside the country," he told local media.
The decision to levy a five percent tax on outgoing remittances was included in the Finance Bill, which was introduced into the Lok Sabha, India's Lower House of parliament, by the Finance Ministry, on 1 February, 2020. It was enacted into law soon afterwards.
Any amount sent abroad to buy foreign tour packages, and every other foreign remittance made above ₹7 lakh, will attract a tax-collected-at source (TCS) unless tax is already deducted at source (TDS) on that amount.
While the tax on foreign tour packages will be 5% for any amount, for other foreign remittances the tax will kick in only for the amount spent above ₹7 lakh.
For education-related foreign remittances funded by loans, though, the tax will be just 0.5% for the amount above ₹7 lakh, considering many Indian students take loans to pursue education abroad.
Under the Reserve Bank of India's liberalized remittances scheme, individuals can remit a maximum of $250,000 abroad every year.
The text of the bill pertaining to tax deducted at source for outgoing remittances said: "Every person being an authorised dealer, who receives any amount, or an aggregate of amounts, of seven lakh rupees (£7200) or more in a financial year for remittance out of India under the Liberalised Remittance Scheme of the Reserve Bank of India from a buyer, being a person remitting such amount out of India, or being a seller of an overseas tour programme package, who receives any amount from a buyer, being the person who purchases such package, shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer by any mode, whichever is earlier, collects from the buyer, a sum equal to five per cent of such amount as income-tax."
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