Sending money back home from the US could turn costlier with the proposed “One Big Beautiful Bill” by the US, including a 3.5% tax on all remittances by non-citizens.
While the US has become the top source of remittances to India, accounting for 27.7% of the total inward remittances of $118.7 million in 2023-24, for now the government is not too worried about the proposed bill. The government is also likely to carry out an analysis of the impact of the tax proposal on remittances from the US.
“We are keeping a close tab on the developments with regard to the bill. For now, it is not a major source of worry though India gets a large amount of inward remittances,” noted an official source. They further pointed out that a large part of the remittances are savings or payments made by Indians living abroad to their families in India and this is unlikely to be impacted due to a tax, although the cost for the person involved will certainly rise.
Remittances play a crucial role in financing the merchandise deficit and also help build a buffer to absorb any external shocks. According to the World Bank, India has continued to remain the top recipient of remittances since 2008, with its share in world remittances rising from around 11% in 2001 to about 14% in 2024. “Going forward, remittances to India are likely to remain elevated and are projected to increase to around $160 billion in 2029,” an article in the Reserve Bank of India’s monthly bulletin for May 2025 had noted.
The US had initially proposed a 5% tax on remittances as a means to protect against dollar outflows. It has, however, decided to reduce it to 3.5% now. If enacted, the tax will apply on remittances from January 1, 2026. It has already been passed by the US House of Representatives and is seen to reflect US President Donald Trump’s economic vision.
A report by Grant Thornton Bharat said that this would impact any outbound remittances by non-citizens such as Green Card holders or other visa holders. “Remittance transfer providers must collect and remit the tax quarterly to the Treasury and have secondary liability for unpaid taxes. Transfers sent by verified US citizens or nationals through qualified providers who have agreements with the Treasury to verify senders’ status are exempt,” it explained, adding that a refundable tax credit is available for taxpayers with valid Social Security numbers.
Sandeep Jhunjhunwala, M&A Tax Partner at Nangia Andersen pointed out that by exempting only US citizens and nationals making remittance through qualified remittance transfer provider, the proposal disproportionately affects millions of lawful immigrants including green card holders, work visa holders, and non-resident aliens, many of whom maintain ongoing financial obligations in their home countries.
He further pointed out that in addition to personal remittances, the provision could also affect compensation practices. Many foreign nationals receive restricted stock units (RSUs) as part of their pay packages. When these RSUs vest and are sold, the sales proceeds are often transferred overseas to home country, for personal use, family support, or investment.
“Under the proposed remittance tax, such transfers even of post-tax proceeds could attract the levy, adding a layer of cost to already-taxed income,” Chaufla said. If enacted, this provision risks diminishing the United States’ attractiveness as a destination for international talent and investment, while also raising diplomatic sensitivities and increasing compliance challenges for both individuals and employer enterprises, he further warned.
