MUMBAI: Sending money from the US to India might get expensive come 2026, if President Donald Trump has his way. According to the 1,116-page 'One Big Beautiful Bill' that details the Trump government's plans to reform taxes and cut expenditure, non-citizens sending money abroad would be required to pay 5% tax.
This is of special significance to Indians who are among the largest migrants in the US. More than 2.9 million Indian immigrants lived in the US as of 2023, making the country the second most popular global destination for Indians after the United Arab Emirates, as per Migration Policy Institute data. The data further says that Indians make up the second largest foreign-born group in the US after Mexicans, accounting for 6% of the 47.8 million foreign-born residents as of 2023.
The Bill exempts US citizens from paying remittance tax (the bill calls it an excise tax). Only non-US citizens would be required to pay. This includes green card holders and those with employment visas.
In case of US citizens, where 5% tax is collected, the bill provides a mechanism to take credit at the time of filing returns provided the individual is a verified US sender and is sending funds through a qualified remittance provider. As per the bill-which is yet to become law-this privilege is not meant for others living in the US, like green card holders and professionals on work visas, many of whom are Indians.
"The measure is aimed at protecting the outflow of US dollars and encouraging local investments while generating an additional stream of revenue," says Kuldip Kumar, partner, Mainstay Tax Advisors.
WHAT SHOULD NRIs DO?
A reading of the bill shows there is not much the NRIs can do. The proposed 5% tax will shave off a small part of the money being sent to India. This is expected to hit those who send money regularly.
Sudarshan Motwani, founder & CEO of BookMyForex, says this will have a big impact on those who have gone to the US to work. "These people have gone there for better prospects so that they can support their families back home. They need to send money to India. They will all be subjected to the new 5% tax," says Motwani.
The share of the US in India's total inwards remittances is the largest-27.7% in 2023-24 (approximately $32 billion), up from 22.9% in 2016-17, as per Reserve Bank of India data.
"This measure could impact the flow of funds into Non-Resident External (NRE) accounts and investments in India's booming premium real estate market, which has been increasingly attracting capital from Indians abroad," adds Kumar.
Manoj K Pahwa, FEMA and international tax consultant, echoes the reading. He says the Bill seeks to exempt US citizens and nationals from paying the 5% tax.
Pahwa says the tax would dissuade Indians from sending as much back home as they used to earlier. "To avoid paying 5% tax and reduce the burden of having to wait for a refund or adjustment at the time of filing returns, many would now invest in the US itself."
This is of special significance to Indians who are among the largest migrants in the US. More than 2.9 million Indian immigrants lived in the US as of 2023, making the country the second most popular global destination for Indians after the United Arab Emirates, as per Migration Policy Institute data. The data further says that Indians make up the second largest foreign-born group in the US after Mexicans, accounting for 6% of the 47.8 million foreign-born residents as of 2023.
The Bill exempts US citizens from paying remittance tax (the bill calls it an excise tax). Only non-US citizens would be required to pay. This includes green card holders and those with employment visas.
In case of US citizens, where 5% tax is collected, the bill provides a mechanism to take credit at the time of filing returns provided the individual is a verified US sender and is sending funds through a qualified remittance provider. As per the bill-which is yet to become law-this privilege is not meant for others living in the US, like green card holders and professionals on work visas, many of whom are Indians.
"The measure is aimed at protecting the outflow of US dollars and encouraging local investments while generating an additional stream of revenue," says Kuldip Kumar, partner, Mainstay Tax Advisors.
WHAT SHOULD NRIs DO?
A reading of the bill shows there is not much the NRIs can do. The proposed 5% tax will shave off a small part of the money being sent to India. This is expected to hit those who send money regularly.
Sudarshan Motwani, founder & CEO of BookMyForex, says this will have a big impact on those who have gone to the US to work. "These people have gone there for better prospects so that they can support their families back home. They need to send money to India. They will all be subjected to the new 5% tax," says Motwani.
The share of the US in India's total inwards remittances is the largest-27.7% in 2023-24 (approximately $32 billion), up from 22.9% in 2016-17, as per Reserve Bank of India data.
"This measure could impact the flow of funds into Non-Resident External (NRE) accounts and investments in India's booming premium real estate market, which has been increasingly attracting capital from Indians abroad," adds Kumar.
Manoj K Pahwa, FEMA and international tax consultant, echoes the reading. He says the Bill seeks to exempt US citizens and nationals from paying the 5% tax.
Pahwa says the tax would dissuade Indians from sending as much back home as they used to earlier. "To avoid paying 5% tax and reduce the burden of having to wait for a refund or adjustment at the time of filing returns, many would now invest in the US itself."
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