'The One, Big, Beautiful Bill': How Trump’s 5% remittance tax plan could cost Indians billions

A new fiscal proposal championed by the US Republican leadership is drawing significant attention — and concern — for a clause that could have far-reaching financial implications for millions of migrant workers, particularly Indians living in the United States.

The proposal, officially titled The One Big Beautiful Bill, introduces a 5 per cent tax on all remittances sent outside the US by individuals who are not American citizens.

This remittance tax, quietly buried in a voluminous 389-page legislative package, could deal a severe blow to overseas Indians who regularly send money to their families in India or invest back home.

While the bill is a broader fiscal package aimed at extending Trump-era tax cuts and slashing federal spending, the proposed remittance tax — outlined on page 327 — has emerged as one of its most controversial elements due to its regressive nature and direct targeting of non-citizens, many of whom are already part of the working class or sending substantial portions of their income abroad to support family members.

Why Indian migrants will be among the hardest hit

The United States is not only home to one of the world’s largest Indian diasporas but also the largest source country for remittances to India.

According to India’s Ministry of External Affairs, there are nearly 4.5 million overseas Indians in the US, including about 3.2 million Persons of Indian Origin (PIOs).

Most of these individuals are in the US on temporary work visas like H-1B and L-1, or are green card holders who have not yet acquired citizenship.

The financial impact of the remittance tax could be substantial. In fiscal year 2023–24, India received $118.7 billion in remittances globally, with approximately 28 per cent ($32 billion) coming from the United States alone, according to the Reserve Bank of India.

If this remittance tax were to be enacted without exemptions or thresholds, it would result in an additional $1.6 billion annually in taxes levied on the Indian diaspora in the US.

Moreover, no minimum exemption limit has been proposed, meaning even small-value transfers — for example, money sent to parents for daily living expenses or modest investments in Indian real estate or mutual funds — would be taxed at the full 5 per cent rate.

These taxes would be withheld by the remittance service provider at the point of transfer, affecting both traditional bank transfers and NRE/NRO account transactions.

What exactly is in the bill?

The remittance clause in the bill mandates that “a tax equal to 5 per cent of the amount of such transfer” shall be applied to any international remittance unless the transferor is a “verified US sender.”

According to the bill’s definition, a verified US sender must be a citizen or national of the United States. Therefore, this tax will apply to all non-citizens — including those legally residing and working in the US — unless exempted under specific, narrow definitions that currently do not include green card holders or most visa categories.

A potential tax credit may be available against US income taxes for those who qualify, but the immediate impact will be a mandatory 5 per cent withholding by banks and financial services providers.

The bill is part of a broader fiscal agenda spearheaded by the House Ways and Means Committee and aligned closely with US President Donald Trump’s economic vision .

The full legislative package is valued at approximately $3.9 trillion, and the remittance tax is being promoted as a revenue-generating measure to offset anticipated losses from expanded tax cuts, including exemptions for tips, overtime pay, local deductions, auto loans, and more.

How this may impact developing economies

Remittances have long been a critical source of income for low- and middle-income countries, often exceeding foreign direct investment (FDI) flows.

According to the World Bank, remittances to such countries are projected to hit $685 billion in 2024, outpacing other financial flows thanks to robust job market recoveries in OECD countries post-pandemic and persistent migration pressures driven by demographic, economic and environmental factors.

India has remained the top global recipient of remittances for over 25 years, with 2024 marking a record high inflow of $129.4 billion, driven in large part by its expansive overseas workforce in North America and the Gulf countries.

Remittance growth in 2024 is estimated at 17.4 per cent, sharply outpacing the global average of 5.8 per cent, according to the World Bank. Other top recipients included Mexico ($68 billion) and China ($48 billion).

The World Bank noted in a blog post at the time that “countries need to take note of the size and resilience of remittances and find ways to leverage these flows for poverty reduction, financing health and education, and improving access to capital markets.”

However, the imposition of taxes on remittances from the world’s largest sender — the United States — could undermine these goals by reducing the net amount received by households in developing nations.

Backlash & concerns from migrant rights groups

Critics argue that the proposed tax is not only regressive but also inequitable, as it penalises those who already face economic vulnerability. Quoted by finance news website Mi Bolsillo, a spokesperson from a migrant rights group based in New York warned: “This tax is a regressive measure that hits those with the least margin. Remittances are not luxuries; they are a lifeline for millions.”

The tax could disproportionately burden low- and middle-income workers, many of whom remit a significant portion of their earnings to cover essential expenses for family members abroad — from food and rent to healthcare and education.

For example, a worker sending $300 per month to family in India would have to pay an additional $15 per transaction, which can accumulate quickly over the course of a year.

Concerns have also been raised among moderate Republican lawmakers, especially those representing districts with large migrant populations.

The political messaging of the bill has drawn scrutiny for appearing contradictory — while it expands tax benefits for American workers, it simultaneously punishes those who support families outside the US, even if they are law-abiding, taxpaying residents.

In addition to the remittance tax, the bill includes other contentious provisions such as potential cuts to Medicaid and SNAP, new taxes on elite universities and the repeal of subsidies for clean energy initiatives.

What lies ahead

The legislative timetable is aggressive. The US House of Representatives intends to pass the bill by Memorial Day (May 26, 2025), after which it would proceed to the Senate.

If successful, lawmakers aim to have it signed into law by July 4th, using the symbolic national holiday as a backdrop for promoting the bill’s patriotic appeal.

If enacted, the remittance tax would come into effect almost immediately, with financial institutions expected to implement the 5 per cent withholding at the point of transfer.

There is no exemption based on the amount or purpose of the remittance — meaning funds sent for education, healthcare or emergency support will be taxed just the same.

This could dramatically alter the financial planning of overseas Indians. Advisors and cross-border financial experts have begun urging clients to preemptively transfer larger sums before July to avoid being subject to the new tax.

Others recommend consolidating multiple small remittances into fewer, larger transactions — though doing so may trigger additional reporting requirements under US laws such as FBAR and FATCA, especially for transactions exceeding $10,000.

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With inputs from agencies