How a new US tax plan could hit Indian expats hard from 2026

Dubai: A new tax proposal making its way through the US Congress could mean higher remittance costs for millions of Indians living and working in America.

If passed, the law would impose a flat 5% tax on every dollar sent overseas by non-US citizens, starting January 1, 2026. And for the Indian diaspora, which sent about $32 billion home in 2023 alone, that could mean an extra $1.6 billion in taxes annually.

The provision is part of what’s being called the “One Big Beautiful Bill” — a sweeping piece of legislation backed by former US President Donald Trump, which has just cleared a major hurdle in the House of Representatives. It’s expected to be signed into law by July this year, unless blocked in the Senate.

The proposed remittance tax applies to all non-citizens, including those on H-1B and L-1 visas, Green Card holders, international students, and other legal immigrants. It also offers no exemption threshold — meaning even small remittances, say $100, would be taxed. The tax will be collected at the point of transfer by remittance providers and remitted to the US Treasury.

US citizens are exempt from this tax if they use certified providers. But most Indian expats, many of whom send money regularly for family support, education, medical expenses, or home loans, will feel the pinch.

For example, if you send $1,000 to India in 2026, expect to lose $50 upfront to tax. Do that every month, and that’s $600 lost in a year — funds that could have gone toward rent, tuition, or savings.

India is the world’s top recipient of remittances, receiving over $125 billion in 2023 — with nearly 28% of that coming from the US. Experts warn that even a small slowdown in transfers from America could cost India $12 to $18 billion annually, potentially weakening the rupee and affecting families, especially in Tier 2 and Tier 3 cities.

Real estate, higher education, and healthcare are some of the biggest sectors supported by expat money. The impact may also be felt in stock and mutual fund investments routed via NRE and NRO accounts.

Financial planners expect a short-term rush of remittances before the tax kicks in — similar to trends seen in the UAE when remittance rules tightened.

US-based wealth advisors have flagged that they are already seeing families shifting funds into NRE accounts and Indian investments to beat the year-end cutoff.

But from 2026 onward, sending money home could become a costlier affair. Analysts suggest that for many in the middle-income group, this tax could mean smaller or less frequent transfers. High-income earners may be able to absorb the cost, but others will likely need to rework their financial plans.

The backlash online has been strong, with critics arguing that the tax unfairly targets working immigrants, most of whom are already paying federal and state taxes on their income.

Legal advisors in India have flagged that there’s growing worry this tax could drive people to use unregulated remittance methods, which are less secure and harder for authorities to monitor.

Some even fear the tax contradicts economic freedom and could make the US a less attractive place for international talent — especially since many workers rely on sending post-tax income home to support families or invest in Indian property and markets.

If passed, the law will come into effect from January 1, 2026. That gives Indian expats about 18 months to rethink their remittance strategies, consult financial planners, and act early to avoid being caught off guard.

Experts advise reviewing your current remittance schedule, exploring one-time bulk transfers in 2025, or restructuring how funds are moved internationally. It’s not merely a financial issue — this tax could disrupt family responsibilities, long-term plans, and life goals, notes financial planners.

The clock is ticking.