Non-Resident Indians (NRIs) will have to pay more to remit money to India as the government of India has imposed a service tax on “fees or commission” levied by banks and financial institutions for facilitating remittances from abroad.

The change adds to the cost of money transfers to India but expatriates should not see a large increase in costs as the 12.36 % service tax is imposed only on the “fee or commission charged by banks for facilitating remittances” and not on the amount of the actual remittance.

Despite this the move has been unpopular with many people. Remittances from abroad are very important to some people, for example the remittances of funds home by Indian nationals working in the Middle East and other parts of the world. Although the previous government had considered introducing a similar tax in 2012, it had to withdraw the tax proposal following widespread protests from NRIs. Such protests are taken seriously as NRIs are also an important source of inward investment.

A circular issued by India’s Central Board of Excise and Customs (CBEC) late on Tuesday confirmed that banks and financial institutions have to pay a service tax for the fee or commission they levy for facilitating money transfers from abroad.