Financial Insights That Matter
Speaking on the implications of the proposed 5% tax on international transfers by non-citizens in the US, including H-1B and F-1 visa holders, EY India’s Mayur Shah said it needs to be seen how this works out — “whether it’s creditable or permanent cost”.
In a conversation with NDTV Profit on Thursday, Shah, who is tax partner at EY India, compared the Donald Trump-led administration’s proposed tax with India’s tax collected at source or TCS regime, and flagged potential concerns for non-residential Indians.
“The US proposal introduces a 5% tax on outbound transfers made by non-citizens, such as H-1B and F-1 visa holders. In India, a similar mechanism exists in the form of TCS on foreign remittances under the LRS. However, unlike the proposed US tax, TCS is allowed to be set off against the taxpayer’s overall income-tax liability,” Shah said.
“If you look at India, when you remit under LRS, you pay TCS, which is creditable against the taxes you are required to pay on your income. But we really need to see how this works in the US. If it’s not the same, then it will be a challenge—especially under a double taxation avoidance agreement—whether the home country will allow credit for such taxes paid or not. Or is it going to be a permanent sunk cost? That needs to be seen,” he added.
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