Punjab Chief Minister Parkash Singh Badal today asked Prime Minister Manmohan Singh to immediately withdraw any proposal to impose 12.36 per cent tax on remittances from NRIs.

In a letter to the Prime Minister, Badal said that it has come to his notice that the Union government has proposed to impose a tax on remittances from NRIs working and settled abroad. 

However, the Finance Ministry earlier this week, had clarified that "remittances of foreign currency received from abroad will not attract service tax".

It had further said that "since remittances are received from outside the country, which means transaction originates from a place outside the taxable territory, service tax is not leviable in terns ofthe place of supply rules".

Badal pointed out that the Punjabi diaspora had already aired its displeasure at this move because Punjab has substantial population working abroad which was the sole bread earner for their families living in India.

These individuals work under difficult conditions, separated from their families, in order to earn their livelihood.

A tax on this meager remittance amount would hit at their very existence and cause much pain and consternation.

Badal's letter to the Prime Minister follows objection raised by Kerala Chief Minister Oommen Chandy over the reported move by the government to levy the tax on the money of Indians working abroad.

Earlier this week, Kerala Chief Minister Oommen Chandy had said that Prime Minister Manmohan Singh had dismissed reports of any plan to bring under the service tax ambit foreign remittances by overseas Indians.

Remittances contribute substantially to the annual income of the households in Kerala.

Badal further stated from the media reports it appeared that the tax had been levied in order to check illegal inflow of money which may be used for drugs and other illegal activities.

However, resorting to taxation was not the solution to the problem. Even, agricultural income was shown in the IT returns, but it is not taxed by the government.

Thus, the Union government may asked the beneficiaries to reflect such income received from abroad in their IT returns but such income should be exempted from income tax, added Badal. (PTI)