Indians will have to pay a new rate of 5 percent tax for any cash sent abroad above the Rs 7 lakh limit
Indians have started to gradually move their money to escrow accounts ahead of the April 1 implementation of a new 5 percent tax collected at source (TCS) on foreign spends. As part of a Budget 2020 announcement, the finance ministry imposed a 5 percent TCS on cash above Rs 7 lakh sent abroad starting next fiscal.
The 5 percent tax will be applicable on funds sent abroad even for visa purposes. So far, there was no such tax on payments or fund transfer from India to any other country.
An escrow account is an account where funds are held in trust while two or more parties complete a transaction. This is held securely in a bank account till the time the transaction progresses.
In an interaction with Moneycontrol, Mark Davies, Global Chairman of New York-based immigration law firm Davies & Associates, LLC said the movement of funds for E-2 visa has begun in anticipation of the tax burden.
“Indian clients have begun the process of setting up escrow accounts in advance so that they are not hit by the tax expenses in the future," he added.
Davis said with the waiting period for the EB-5 visa to the United States of America stretching to nearly seven years, Indians are now eyeing the E-2 visa route.
The new tax would mean the amount set aside to immigrate will also go up. Hence, the rush to transfer money ahead of the deadline.An E-2 is a non-immigration programme under which an individual can set up a business and work in the US at an investment of $100,000.
process of getting an E-2 visa is simpler. An individual has to apply for a Grenada passport, which would take 3-6 months, and then apply for an E-2 visa.
Apart from Grenada, an individual can apply for a Turkish or Montenegro passport and use a similar route to apply for an E-2 visa. This visa is issued for five years but can be renewed for a lifetime. Davies said the law firm had a 100 percent success rate in their applications.It is unlikely that the provision for 5 percent TCS will be delayed or withdrawn. Indians eyeing an American dream are ensuring that they beat the rush by moving their funds quicker.
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