The Indian immigrant community in the United States is experiencing a mix of anxiety and cautious optimism following developments surrounding a proposed remittance tax. Initially set at 5%, the proposed tax on money transfers sent by non-US citizens has been reduced to 3.5% under the "One Big, Beautiful Bill Act," championed by President Trump. While the reduction offers some relief, concerns remain about the financial impact on families in India who rely on these remittances.
The "One Big, Beautiful Bill Act," a sweeping tax-and-spending package that encapsulates President Trump's economic vision, has been approved by the US House of Representatives and is now headed to the Senate. A key provision of the bill is the 3.5% tax on remittances sent abroad by non-US citizens, effective January 1, 2026. This tax, referred to as an "excise tax," will apply to green card holders and individuals on employment visas, but exempts US citizens.
The Indian diaspora, one of the largest migrant communities in the US, is particularly affected by this legislation. As of 2023, over 2.9 million Indian immigrants resided in the US, making it the second most popular destination for Indians globally. Indians also represent the second-largest foreign-born group in the US, accounting for 6% of the country's 47.8 million foreign-born residents. Given the significant volume of remittances flowing from the US to India, the proposed tax has raised considerable concerns.
India is the largest recipient of remittances from the US, receiving $32.9 billion in 2023-24, which constitutes 27.7% share in the country's inward remittances, according to the Reserve Bank of India (RBI) data. Overall, remittances to India have more than doubled from $55.6 billion in 2010-11 to $118.7 billion in 2023-24. The Global Trade Research Initiative (GTRI) has warned that the tax could reduce remittances to India by 10–15%, amounting to a shortfall of $12–18 billion annually.
The proposed tax has sparked debate about its potential consequences. Supporters argue that it will generate revenue for the US Treasury and encourage local investment. The Trump administration estimates that this tax will raise approximately $22 billion between 2026 and 2034. However, critics contend that it disproportionately burdens vulnerable populations who depend on these financial transfers and may push money transfers into informal, unregulated channels.
Experts predict that the tax could discourage remittances to India and prompt increased investments within the US. Some believe that to avoid the tax, many Indians may choose to invest more money in the US. There are also concerns about whether the tax will affect investments made by Indians in US markets, such as stocks or other financial instruments, when they withdraw funds.
The reduction from the initially proposed 5% to 3.5% has been welcomed as a "big relief" by some, translating to immediate savings on remittances. For instance, on a $10,000 remittance to India, the tax drops from $500 to $350, saving approximately ₹12,000 per transaction. However, the new bill also introduces stricter regulatory oversight, requiring money transfer firms to report individuals who send more than $5,000 in a single day, potentially delaying transfers due to tighter KYC rules and compliance filings.
Looking ahead, tax firms anticipate a surge in remittance transfers in the remaining months of 2025 before the tax goes into effect on January 1, 2026, if adopted by the Senate. The Financial Technology Association (FTA) has expressed skepticism about the bill's passage in the Senate, highlighting concerns about the unfair burden on unbanked households that rely on remittance services. As the bill awaits Senate approval, the Indian immigrant community remains vigilant, assessing the potential impact on their families and financial futures.
