A few years ago, USA had thought of imposing a tax on money (remittance) sent by migrants from Mexico. On this, Mexico’s president Amlo (AndrΓ©s Manuel LΓ³pez Obrador) said in anger:
If there is a need, we will protest! We don’t want our people’s money to be taxed!”
After hearing this statement, the question arose, why did this controversy arise? Did the US really impose tax? And how are India’s issues connected?
Mexico vs USA: Why tension over money?
Millions of people from Mexico work in the USA and send billions of dollars home every year.
In 2019, the Trump government thought “Why not impose tax on money?”
The aim was to stop illegal immigration and get extra revenue for it.
But Mexico announced “If tax is imposed, we will walk on the streets!”
What happened next?
USA did not impose tax on money in the end, but this issue can still be heated up.
Why are Indians worried?
A large number of people from India work in USA, Gulf and Europe. More than $100 Billion (approximately 8 lakh crore rupees) of remittance comes to India every year.
Has such a tax been imposed in India as well?
In 2013, Chhattisgarh government tried to impose 2% tax on money coming from there.
But after opposition it may have to be taken back.
In states like Kerala also, such demands have been raised at times, but no tax has been imposed till now.
Is there a tax on remittance in other countries?
Mexico: No, but there was a dispute after the threat from USA.
Philippines: Some things are left out, but tax can be imposed on big transactions.
Nigeria: Sometimes bank charges are levied, but there is no direct tax.
India: No tax as of now, but RBI and government can change the rules.
Can such a tax be introduced in the future?
If USA imposes tax on Mexico, then it can also affect countries like India.
The Indian government does not want to impose tax on NRI remittances yet, because:
It is necessary for the country’s economy.
NRIs may get angry, which will affect foreign investment.
Conclusion: what to do?
If you are an NRI or send/receive money from abroad, then keep an eye on tax on money rules.
If any new tax comes, then you can avoid it through legal ways (like gifts, FCNR accounts).
The government will think a hundred times before imposing tax on remittances, because it can fuel the anger of the expatriates.
Final Thought
“Earning money is difficult, tax on it is even more difficult!” That is why the governments also do not take this issue lightly.
Do you think that India should also impose tax on remittance? Tell us in the comments!
(This blog is only for information, for tax advice consult a CA/Financial Expert.)
