No service tax on NRI remittances: Indian govt clarifies
Indian government was contemplating to impose a 12.36% service tax on remittances from non-resident Indians (NRIs).
But after various forums expressed concerns over the service tax on the remittance of foreign currency from overseas, the Ministry of Finance axed the plan.
“The matter has been examined and it is clarified that there is no service tax per se on the amount of foreign currency remitted to India from overseas,” the circular issued by the Department of Revenue at the Ministry of Finance on July 10, 2012 read.
The circular further clarified that even the Indian counterpart bank or financial institution who charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax.
A remittance is the money a person working in a foreign country transfers to his or her home country.
The new service tax was supposed to come into force from Sunday, July 1, 2012. But the idea had met with opposition from local governments in Kerala and Punjab.
“As the amount of remittance comprises money, the activity does not comprise a ‘service’ and thus not subjected to service tax,” the circular from the finance ministry read.
Wondering what is NRI remittance tax? Read our explanation here.
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