MAY 16, 2025
A new bill introduced by US House Republicans aims to levy a 5 per cent tax on all international remittances made by non-citizens, a move that could directly impact millions of Non-Resident Indians (NRIs) who regularly send money home. The bill, part of broader legislation to make the 2017 Tax Cuts and Jobs Act permanent, has received support from President Donald Trump in his second term and is expected to be fast-tracked through Congress by Memorial Day (26 May 2025).
If enacted, this tax would apply to all outbound remittances, regardless of the purpose whether for family maintenance, education, medical expenses, or real estate investments. “For many immigrants, sending money home is not a luxury but a necessity,” the Angel One research team noted in their 15 May update, cautioning that the measure could disproportionately affect middle-income diaspora families.
According to the World Bank, India received over USD 83 billion in remittances in 2024, with a substantial share originating from the United States. Under the proposed tax structure, a remittance of Rs 1 lakh would see Rs 5,000 diverted to the Internal Revenue Service (IRS) before reaching India.
What the Tax Means for NRIs
The proposed tax adds a new financial layer to remittance planning. For every USD 1,000 sent, USD 50 would be withheld at source. This could significantly affect:
- Monthly remittances for household expenses
- Educational transfers for Indian students abroad
- Home loan repayments and property purchases
- Charitable or emergency aid to family members
“NRIs may shift from frequent small remittances to fewer larger ones to reduce the frequency of deductions,” the report suggested.
Implementation and Compliance
The bill proposes swift implementation, with the tax to be collected directly by banks, remittance platforms, and financial intermediaries at the time of transaction. There are no exemptions, including for transfers through:
- Bank wire services
- NRE/NRO accounts
- Online money transfer platforms
The measure does not override existing financial compliance laws such as FATCA and FBAR, but will increase scrutiny on cross-border flows. Individuals remitting more than USD 10,000 annually must continue to report under existing foreign account disclosure rules.
Legal and Policy Landscape
This policy shift would reverse decades of US precedent where outbound personal remittances were tax-exempt. Critics argue it effectively taxes personal income a second time and targets immigrant communities who maintain economic and familial ties abroad.
Though not yet law, the bill has strong political backing and is part of a broader fiscal strategy that includes funding for US border security. Advocacy groups have expressed concern that the tax could unfairly burden the working-class immigrant population.
“Until the bill becomes law, no immediate action is required, but NRIs must stay alert,” the article concludes, advising Indian-origin families in the US to prepare for adjustments to financial planning and documentation.
Courtesy/Source: Times Now / PTI
