NRI Problems: More inclusive digital payment infrastructure will facilitate cross border transactions

It is expected that there will be a confluence between the CBDCs and crypto currencies
It is expected that there will be a confluence between the CBDCs and crypto currencies

Dubai - The International Monetary Fund has recently suggested coordinated action among nations to put in place global standards for regulating cryptocurrencies both in emerging and developed countries



By H.P. Ranina

Published: Sun 19 Dec 2021, 2:38 PM

Question - With controversies raging over the benefits and dangers of cryptocurrencies, central banks are strengthening the basic infrastructure and technologies being used. Does the Central Bank Digital Currency (CBDC) have any role to play in the new ecosystem?

A - Under the traditional payment systems, banks store customer information in dedicated databases. The Central Bank Digital Currency (CBDC) aims to bring the entire payments structure under a single umbrella. CBDCs are based on the inherent blockchain framework. It will make it easier for governments to devise complex monetary policies and create stimulus packages. CBDCs are not anti-crypto as they use the same global transactional infrastructure. CBDCs will become important for making payments simpler and quicker. This will in no way impact standard crypto players having their own crypto currencies. Therefore, it is expected that there will be a confluence between the CBDCs and crypto currencies. The more inclusive digital payment infrastructure will facilitate cross border transactions and quicker remittances. It will not be out of place to mention that the International Monetary Fund has recently suggested coordinated action among nations to put in place global standards for regulating cryptocurrencies both in emerging and developed countries.

Q - While working in Dubai, I am also assigned an executive role in an Indian associate company. I draw a salary from this Indian company and I am eligible for all benefits including the company’s provident fund scheme. I have been informed that a change has been proposed to tax a part of the interest earned on the provident fund balances. Can you please offer some information in this regard?

A - New income-tax rules have been notified under which provident fund accounts will be classified into two separate funds, one taxable and the other non-taxable deposit accounts. A new rule 9-D has been introduced which would apply where the amount of interest earned on the provident fund balance exceeds Rs250,000 every year. Such interest will be liable to tax. Further, if the amount contributed by the employer/company in a recognised provident fund or in an approved superannuation fund exceeds Rs750,000 in a financial year, such excess amount would be liable to tax as a perquisite. Tax will be leviable at the normal rates applicable to the aggregate of the salary and perquisites. In short, the perquisite value on which tax would have to be paid would be confined to the amount in excess of Rs750,000 per annum, whereas any amount below this figure would be exempt from tax.

Q - My daughter, who is recently divorced, is residing in India. She would like to have a child through surrogacy. There are some conflicting news reports about a legislation, which has been introduced in India, in this regard. Will this legislation affect a person’s right to become a parent through surrogacy?

A - Your information is correct as a Surrogacy (Regulation) Bill has now been passed by the upper house of Parliament. Under this new legislation, which will be enacted shortly, single men and women are not permitted to become parents through surrogacy. It is permitted only for married couples. Live-in couples are not permitted to have a child though surrogacy. Earlier, it was provided that the surrogate mother should be a close relative of the prospective parents. This clause has now been dropped. However, for surrogates certain restrictions have been imposed. There is a limit under the new law whereby a woman cannot be a surrogate more than once in her lifetime. Further, the woman has to be between 25 and 35 years of age. A limit has also been put on the compensation which can be paid to a surrogate mother. The new legislation has therefore not been well received in view of several restrictive conditions which have been imposed.

- H.P. Ranina is a practicing lawyer, specialising in tax and exchange management laws of India


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