 "How Trump’s ‘Big Beautiful Bill’ is a big upset for non-resident Indians")
On May 22, the US House of Representatives passed President Trump’s ‘Big Beautiful Bill’, which outlines tax cuts for US citizens and spending increases for the federal government. The bill now moves to the Senate, where a vote is likely in late June or July. The Republicans have 53 seats out of 100 in the Senate, and this clear majority will ensure that the bill gets passed by the Senate.
For Trump’s supporters, the bill may appear ‘big’ and ‘beautiful’. However, for foreigners working in the US on H1, L1 or F1 visas or on green cards, it would not be so, as the bill imposes a 3.5 per cent tax on non-citizens sending money abroad. The remittance tax which the Trump administration had proposed was 5 per cent, but it was lowered to 3.5 per cent before the House of Representatives passed it.
The bill exempts US citizens from the remittance tax. Only non-US citizens—including green card holders and those on employment visas— would be required to pay it. The measure is aimed at reducing the outflow of US dollars from the country and encouraging local investment, while also generating an additional stream of revenue.
This bill is a cause of concern for Indian nationals, who are among the largest migrant communities in the US. More than 3.2 million Indian immigrants are estimated to live in the United States. The proposed bill will take away 3.5 per cent as tax from the money sent to India every time a remittance is made from the US by a non-US citizen. Therefore, it will hit these Indian nationals who have gone there to work and send money regularly to their families in India. Their families will now receive less money, as 3.5 per cent will be taken away by the US as tax. Thus for many NRIs, especially those supporting dependents or planning a future back in India, this tax is not good news at all. That is why they are asking the Government of India to try and intervene and help them.
President Trump’s ‘Big Beautiful Bill’ must also perhaps be appearing not so nice and, in fact, rather ‘ugly’ to India’s real estate sector, which has been attracting investments by NRIs. Planning for financial goals like buying property in India is on the agenda of Indians who work abroad, but fulfilling these goals will now effectively cost 3.5 per cent more.
Impact Shorts
More ShortsThe 3.5 per cent remittance excise tax has the potential to have a negative effect on India itself. Once it is implemented, it would dissuade NRIs in the US from remitting as much money as they had been doing till now. India gets a sizable amount in remittances from the US annually. In 2024, the World Bank reported that 28 per cent of the $129 billion in foreign remittances that India received came from the US (which is more than 36 billion US dollars). According to analysts, the 3.5 per cent tax might result in a 10 per cent–15 per cent decrease in remittances to India.
Thus, India could experience a decrease in foreign exchange inflow, as NRIs may find it costly to send money back to India in the future. To avoid paying 3.5 per cent tax, many NRIs working in the US would now increasingly consider investing their money in the US itself.
There are some analysts in India who are suggesting that India should take up the matter with the US government. India exempts foreign remittances up to Rs 10 lakhs from taxes. As regards the tax on remittances above Rs 10 lakhs, the tax is adjusted in the Annual Income Tax Return. Perhaps India can request the US government to consider giving some such concessions, though it is doubtful whether the Trump administration would pay much heed.
Some other analysts have suggested that India should devalue the rupee by 3.5 per cent to offset the losses on remittances by Indian nationals from the US, but any such devaluation is unlikely as it would fuel inflation.
Yet another set of analysts are suggesting that the Indian government could consider offsetting the losses in rupee terms in remittances by US-based Indian nationals by giving them a compensatory bonus of 3.5 per cent. This bonus will be a step which will be welcomed hugely by NRIs, and it will ensure that their remittances don’t come down. At the end of the day, of course, Finance Minister Nirmala Sitharaman and her team have to evaluate the pros and cons of any action.
The only silver lining in Trump’s “Big Beautiful Bill’ is that the 3.5 per cent tax on remittances would be levied from 2026. Therefore, NRIs working in the US have the option to remit their current accumulated savings in 2025 itself if they want to avoid the 3.5 per cent tax.
The writer is a retired Indian diplomat and had previously served as Consul General in New York. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.
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