Chandigarh, Jul 8 (IANS): Punjab, which has a substantial NRI population has opposed the 12 percent service tax on remittances from foreign countries, an official said Sunday. The cess came into force July 1.

The Punjabi diaspora remits home millions of dollars every year.

Chief Minister Parkash Singh Badal has written to Prime Minister Manmohan Singh to immediately withdraw the tax, terming it "as being unreasonably high", an official said.

Badal said that 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 meagre remittance amount would hit at their very existence and cause much pain and consternation," Badal said.

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

"Resorting to taxation was not the solution to the problem. Even, agricultural income was shown in the IT (income tax) returns, but it is not taxed by the government. The union government may ask the beneficiaries to reflect such income received from abroad in their IT returns but such income should be exempted from taxation," Badal said.

The NRI Sabha Punjab has also requested the central government to come clear on charging 12.36 percent service tax on foreign remittances by overseas Indians. It said that the move had upset NRIs, hailing from the state.

Sabha president Kamaljeet Singh Hayer said that he has been receiving a number of telephone calls from NRIs settled in various countries who expressed their resentment on this issue.

He said that the move will result in reduction in foreign remittances to India.

"People will opt for illegal channels...to send money back home. This is not in the interest of the country," Hayer said.