NRIs who send money home, especially Indians, are concerned about a recent proposal by US President Donald Trump. The ‘One Big Beautiful Bill’ includes a proposed 3.5% ( earlier 5%) remittance tax that is intended to promote local investment and reduce the outflow of US funds. Millions of Indians who depend on remittances to support their families back home may be impacted if the bill is approved.
India is one of the world’s biggest beneficiaries of remittances. In 2023–24, the United States accounted for 27.7% of India’s total inward remittances, which were worth about $32 billion. These remittances could be greatly impacted by the proposed tax, which would have an effect on the livelihoods of numerous Indian families. Keystay Tax Advisors Partner Kuldip Kumar said that “the measure is indeed aimed at protecting the outflow of US dollars from the country and encouraging local investment, while also generating an additional stream of revenue.”
Non-US nationals who send money overseas, counting those with green cards and employment visas, will be subject to the proposed levy. This implies that a large number of Indian students and professionals employed in the US will be liable for the tax. If students decide to repatriate their earnings to India after finishing their education and going back home, they will be subject to the 3.5% tax even if they have work-related income, such as from gigs.
Potential Consequences
The proposed tax could have several consequences, including:
- Reduced remittances: The tax could discourage Indians from sending money back home, affecting the livelihoods of their families.
- Increased investment in the US: To avoid paying the tax, many Indians may choose to invest their money in the US instead of sending it back home.
- Impact on mobility programs: Corporates with employees relocated to the US may need to negotiate the additional 3.5% cost as part of their relocation package or under tax equalization arrangements.
Investments in US Markets
Whether the proposed tax will impact Indian investors’ investments in US markets is another important concern. The 3.5% remittance tax may be applicable to transactions in which a person wants to withdraw money or take some money off the table after investing in US stocks or other financial instruments, according to Kumar. This can affect Indian investors and result in extra expenses and factors to take into account when purchasing US stocks.
The bill is now headed to the Senate for a vote, most likely in late June or early July, after passing the House of Representatives. If the measure is approved, it would become law and non-citizens who send money outside will be subject to the remittance tax. More details are expected, particularly with regard to the taxation of US investments and ESOPs.
In conclusion, Indians and other non-US citizens who depend on remittances to support their relatives back home are concerned about the proposed 3.5% remittance tax on non-citizens. The measure may have unexpected effects on the lives of many people and families, despite its goals of reducing the outflow of US dollars and promoting domestic investment.
