Indian expats in US to be hit by tax on remittances

Indian expats in the US could be hit hard by a new bill that proposes a 5% tax on remittances sent outside the country by non-US citizens.

The US House of Representatives has introduced a new legislative proposal titled "The One Big Beautiful Bill," which includes a provision to impose a 5% tax on remittances sent abroad by non-US citizens.

This measure is poised to significantly impact the Indian diaspora, particularly those on H-1B visas and green card holders, who collectively remit approximately $32 billion annually to India. If enacted, the Indian community in the US could face an additional financial burden of around $1.6 billion each year.

Scope of the proposed tax

The remittance tax would apply to all non-citizens, including individuals on H-1B and L-1 visas, as well as green card holders. The bill specifies that a 5% tax will be levied on any money transferred out of the US by non-citizens, with no exemption threshold, meaning even small transfers would be subject to the tax. The tax would be withheld by the remittance transfer provider at the time of the transaction .

Broader implications

India is currently the world's top recipient of remittances, with around $83 billion sent annually from abroad, much of it from the United States. The proposed tax could have profound financial implications for non-resident Indians (NRIs), affecting everyday family support, property purchases, educational expenses, and more. Until now, remittances were not subject to US taxation, making this a significant policy shift .

The bill is part of a broader tax package that aims to make the 2017 Tax Cuts and Jobs Act permanent, increase the standard deduction, and extend the child tax credit through 2028. While US citizens could apply for credits to offset the cost, the remittance tax would hit immigrant households hardest .

Reactions and criticisms

The proposed remittance tax has drawn criticism from various quarters. Critics argue that the move could harm vulnerable communities, reduce economic opportunities abroad, and unintentionally drive more migration. Experts warn that the policy contradicts economic freedom and could cripple both US and foreign economies. There are also concerns that increased transaction costs could push remittances to informal channels, posing economic risks .

Online, many have expressed outrage over the proposal, with some calling it a "new form of stealing." The sentiment reflects a broader concern among immigrant communities about being unfairly targeted by fiscal policies .

Next steps

The House of Representatives aims to pass the bill in May, after which it will move to the Senate. Cross-border investment experts suggest that the bill is likely to pass and may become law by June or July. They advise the Indian diaspora to consider remitting larger funds in the coming weeks to avoid the potential tax .