Sending money home? New US bill proposes 5% tax on remittances by non-citizens

A new bill introduced in the US House of Representatives proposes a 5% tax on all remittances sent outside the country by non-citizens, including H-1B visa holders and green card holders. If enacted, the move will directly affect lakhs of Indians living and working in the US who regularly send money back home, according to a report by Lubna Kably published in The Times of India.

The bill, officially titled The One Big Beautiful Bill, was recently released by the US House Ways and Means Committee. Hidden in page 327 of the 389-page document is a provision mandating a “tax equal to 5 per cent of the amount of such transfer.” No minimum limit has been set, which means even small transactions will be taxed unless the sender qualifies as a “verified US sender,” defined as a US citizen or national.

As per Lubna’s report, this tax will be collected at the point of transfer by the remittance provider, such as a bank or money transfer service. The clause does not apply if the provider is a “qualified remittance transfer provider” and the sender is a verified US citizen.

India is the largest recipient of remittances from the US. According to a Reserve Bank of India (RBI) survey released in March 2024, Indian-origin individuals in the US sent back $32 billion in 2023-24. The Indian Ministry of External Affairs estimates there are about 45 lakh Indians in the US, including 32 lakh Persons of Indian Origin (PIOs).

If the remittance volume remains unchanged, the 5% tax could cost the Indian diaspora approximately $1.6 billion annually.

Cross-border investment advisors say that the bill has a high chance of being passed, as the House plans to vote on it in May. If approved, it could become law by June or July. Advisors are encouraging members of the Indian community in the US to consider making large transfers in the coming weeks to avoid the potential tax burden.

This development is being closely watched by financial service providers, immigration experts, and the Indian government due to its possible wide-ranging impact on remittances and investment flows into India.

(With inputs from TOI)