A new proposal from US President Donald Trump is ruffling feathers among immigrant communities, particularly Indians. Part of what he calls “The One, Big, Beautiful Bill,” the draft legislation suggests a 5% excise tax on remittance transfers by non-citizens—including H-1B, L-1, and F-1 visa holders, as well as green card holders. US citizens and nationals, however, are off the hook.
If this proposal turns into law, it could significantly impact Indian professionals in the US who regularly send money home—either to support their families or invest back in India.
India is the largest recipient of remittances from the US. In the financial year 2023-24 alone, the country received ₹32.9 billion from the US, accounting for nearly 27.7% of its total inward remittances, according to data from the Reserve Bank of India (RBI). Overall, India’s remittance inflows have grown from ₹55.6 billion in 2010-11 to ₹118.7 billion in 2023-24.
Unsurprisingly, the proposed tax has sparked concerns across policy circles, financial institutions, and among Indian expats who form a large chunk of the US skilled workforce.
Akhilesh Ranjan, former member of India’s Central Board of Direct Taxes (CBDT), reportedly pointed out a technical challenge: since the remittance tax is not on income, it may not fall under the existing Double Taxation Avoidance Agreement (DTAA) between India and the US. That means affected individuals may not get any credit for it in their Indian tax filings.
"This is a discriminatory levy targeting non-US citizens,” Ranjan said. “India should consider raising the issue with the US, just as the US had objected to India’s equalisation levy for similar reasons. A 5% charge on remittances could even dent India’s foreign exchange reserves."
Too early to panic?
Government officials in India are staying cautious. "It's a proposal. We don't react so quickly to things. Let us see what happens," said one official, as per reports.
But experts warn the issue could snowball. Sandeep Jhunjhunwala, a partner at Nangia Andersen LLP, said the tax appears to unfairly hit lawful immigrants—many of whom have green cards, valid work visas or are non-resident aliens.
“There’s a lack of clarity on whether people with a social security number will be exempt, or if this is strictly for citizens only. If passed, this could hurt the US’ appeal for global talent and cause diplomatic ripples,” he said.
There’s also concern that the new rule could nudge people towards informal channels to avoid the tax. That, in turn, would not only lower transparency but also increase the compliance burden on money-transfer agencies.
The proposal states that remittance service providers will be responsible for collecting the tax and depositing it quarterly with the US treasury secretary. This will likely mean additional paperwork, audit trails, and software changes—all of which come at a cost.
For many Indians working in the American IT sector, the idea of being taxed yet again feels excessive. “We already pay taxes here. Now we’ll be taxed just for sending money to our own families? That doesn’t feel right,” said one Indian employee of an IT services firm based in New Jersey.
Whether the measure gains traction in the US Congress remains to be seen. But for now, it has already sparked discomfort and debate—both in Washington and New Delhi.
One thing is clear: this 5% tax, if it moves forward, won’t be a small matter for the Indian diaspora.