Indian Expats in the US May Face 5% Tax on Overseas Remittances

Washington : A new legislative proposal in the US House of Representatives could significantly impact Indian expatriates, particularly those sending money back home. Titled “The One Big Beautiful Bill,” the proposal includes a provision to impose a 5% tax on all remittances sent abroad by non-US citizens, potentially affecting millions of immigrant households.

Impact on the Indian Community

If enacted, the bill would impact Indian nationals in the US—especially those on H-1B and L-1 visas, as well as green card holders—who together remit approximately $32 billion annually to India. The proposed tax could translate to an added financial burden of around $1.6 billion per year for the Indian diaspora alone.

Scope of the Proposed Tax

Under the proposed legislation:

• A 5% tax would apply to all money transfers sent outside the US by non-citizens.
• No minimum threshold is provided, meaning even small remittances would be taxed.
• The tax would be automatically withheld by remittance service providers at the time of the transaction.

Broader Implications

India, the world’s largest recipient of remittances—receiving around $83 billion annually, much of it from the US—is expected to feel the effects of this move deeply. The tax may impact routine remittances used for family support, property payments, tuition fees, and other financial commitments.

This marks a significant policy shift, as remittances from the US have traditionally not been subject to federal taxation.

Part of a Larger Tax Package

The bill is part of a wider Republican-led tax reform package, which also seeks to:

• Make permanent the 2017 Tax Cuts and Jobs Act.
• Expand the standard deduction.
• Extend the child tax credit through 2028.

While US citizens could claim credits to offset the remittance tax, non-citizens would not be eligible, disproportionately affecting immigrant communities.

Public Reaction and Criticism

The proposal has sparked criticism from immigrant rights groups, economists, and financial analysts. Critics argue the tax:

• Places an undue burden on working immigrants.
• May drive remittances to informal and unregulated channels, creating economic risks.
• Contradicts principles of economic freedom and mobility.
• Could reduce the flow of legitimate international funds and impact the economies of recipient countries.

Social media has also seen a wave of backlash, with many calling the measure unfair and targeting already vulnerable communities.

What’s Next?

The House of Representatives plans to vote on the bill in May, with Senate consideration expected to follow shortly after. Some cross-border finance experts anticipate the bill could become law by June or July, urging Indian expats to consider advancing planned remittances to avoid potential taxation.