Saudi riyal banknotes
Saudi Arabia plans to reduce its dependency on oil revenue in coming years

Lakhs of Indians in Saudi Arabia are expected to return to the country soon as the kingdom is set to levy a "dependent fee" from July 1, 2017. The fee, also called the "family tax," will be a rather heavy expenditure for about 41 lakh Indians residing in the kingdom for work or as dependent members.

To avoid paying this tax, many Indians are said to have sent their family members back to the country and migrant rights activist Bheem Reddy Mandha said that in the past four months "the men have become forced bachelors," reported the Times of India.

"Some families who I know have made plans to return to Hyderabad as they feel they cannot afford to stay there any longer," Mohd Taher, a computer professional from Hyderabad, who lives in Dammam, told the Times of India. About 10 lakh expats in Saudi Arabia are said to be from Andhra Pradesh and Telangana alone.

So what exactly is dependent fee or family tax?

Under the family tax plan, expats will be required to pay 100 Riyals (about Rs 1800) per month for each dependent member in the family. For instance, a person living with wife and two children will have to shell out 300 riyals each month, which is approximately Rs 5,170.

Meanwhile, what adds to the woe is that the entire amount for the year needs to be paid in advance while renewing the residency permit. The residents at present pay 50 Riyals for each family member.

If the 100 Riyals per family member per month wasn't enough, the tax is set to increase by 100 Riyals every year until 2020, which means by then the fee for each family member will be 400 riyals (Rs 6,900 approx).

[Representational image]Creative Commons

Why is Saudi Arabia levying this tax?

The new tax is expected to boost the kingdom's economic condition and increase its revenue amid weak oil prices. While the tax is likely to help in bettering the government's revenue, it will also increase the cost of doing business in the kingdom, reported Gulf News.

Apart from the budget issues, the International Monetary Fund is also said to be urging Saudi Arabia to levy more taxes to make up for the falling revenue caused by falling oil prices.

"Saudi Arabia has one of the most liberal labour policies globally, with very few restrictions on importing foreign labour to work in the kingdom," iExpats quoted the government as saying. "Currently, neither Saudi nationals nor foreign labourers pay income taxes, and this policy will remain in place."