New US Bill Proposes 5% Remittance Tax on Indians Living in America
US Plans to Tax Money Sent to India by H-1B and Green Card Holders
A sweeping new proposal by the US House Ways and Means Committee, framed as a part of a larger tax reform package, is sending shockwaves across the vast Indian diaspora in America. Buried deep within the 389-page bill lies a provision poised to financially sting lakhs of Indian immigrants: the introduction of a US Remittance Tax on Indians and other non-citizens.
Under this proposal, any individual who is not a US citizen and remits money overseas will be subject to a 5% tax on the amount transferred. This includes millions of H-1B and L-1 visa holders, as well as green card holders, many of whom regularly send money home to support family, invest in real estate, or maintain ties with their roots in India.
$1.6 Billion Blow for Indian Diaspora
According to the Reserve Bank of India’s latest Remittance Survey, India received $118.7 billion in remittances in FY 2023-24, with 28%—roughly $32 billion—coming from the US alone. Should this bill become law, it could mean an additional $1.6 billion annually in remittance tax paid by Indian-origin residents in the US.
The Ministry of External Affairs (India) estimates that there are nearly 45 lakh overseas Indians in the US, including approximately 32 lakh persons of Indian origin. Many of them work in high-skilled sectors under non-immigrant visa programs like H-1B, which allows Indian professionals to temporarily live and work in America. For them, this new tax is not just a financial burden—it’s an emotional and ethical dilemma.
No Minimum Threshold, No Small Exemptions
The remittance tax is outlined on page 327 of the proposed bill and is startlingly clear in its language: a 5% tax on all outbound transfers by non-citizens. Even small remittances—whether for tuition, medical aid, or daily family support—will not be spared. What’s more, the bill does not offer any minimum exemption threshold, a departure from many traditional tax structures.
Further scrutiny reveals that exemptions will apply only if both the remittance provider is “qualified” and the sender is a “verified US sender”—defined strictly as a US citizen or national. This explicitly leaves out green card holders, temporary work visa holders (like H-1B, L-1), and international students.
In essence, if Rajiv, an H-1B tech employee in California, sends $10,000 to his elderly parents in Mumbai, he would be hit with a $500 remittance tax—upfront.
Legal Status Doesn’t Guarantee Relief
While green card holders are considered lawful permanent residents, they still fall short of the ‘US citizen’ requirement for exemption. Some tax advisors have noted that a tax credit may be claimable when filing annual returns, but this would provide relief only months later and may not apply universally.
Banks and remittance services like Western Union and US banks are expected to withhold this 5% at the time of transfer, making the bite immediate and automatic.
Experts Advise Early Action Before June-July Deadline
The bill is expected to pass the House by the end of May and move quickly through the Senate, with cross-border taxation experts predicting that it could become law by June or July 2025.
Given this short window, financial advisors and immigration consultants are urging Indian-origin individuals to front-load their remittances now, before the tax goes into effect. “If you’re planning to send funds home for parental support, wedding expenses, or investment in Indian property, do it before this bill becomes law,” one consultant advised.
A Question of Equity and Fairness
The proposal has sparked debate over its fairness. While the US government justifies the bill as a revenue-generating measure, critics argue that non-citizens already pay US taxes and contribute significantly to the economy. Penalizing their personal remittances is, according to many, unjust and discriminatory.
“This bill effectively taxes love and duty,” said Dr. Meera Nair, a Houston-based academic and activist. “Many of us send money not because we’re investing, but because we’re caring for aging parents or paying for our siblings’ education. This tax punishes family values.”
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