DUBAI // Indian officials said today that a recently announced tax on foreign remittances may be deferred.
The plan for a 12.36 per cent duty on remittances by non-resident Indians has elicited resentment from expatriates across the world.
"There is a likelihood that the tax will be deferred substantially," said an official from the Indian overseas affairs ministry who declined to be identified.
"We want to make sure the amount is negligible or zero and, as representatives of non-resident Indians, we are taking up the matter on their behalf," he said.
However, Vayalar Ravi, the Indian minister for overseas affairs, said the tax would not be levied on customers, but rather on financial institutions.
"The tax is not for the amount that is being sent but for the services rendered," Mr Ravi said. "There is a wrong propaganda. The tax will be levied on banks and not customers."
Expatriates pay a fixed fee of Dh 15 to remit money to India, regardless of the amount that is sent. Of this, one third or Dh 5 is paid to financial institutions in India. The tax when levied will cost institutions an additional 60 fils, or nine rupees.
But an exchange house said the costs could be passed on to expatriates.
"It will be difficult for the operator to absorb this," said Sudhir Kumar Shetty, the chief operating officer of UAE Exchange.
"It will result in customers bearing the burden. Every month, a poor wage earner could end up paying an additional 12.36 per cent."
He said that even if the amount was minimal, it was not a positive step.
"It is not the time to send such signals. This kind of tax over a period of time will encourage people to look at other informal means of sending money," he said.
pkannan@thenational.ae
