May 16, 2025 02:01 PM IST
Republicans are looking to generate “savings” with new requirements, but Democrats warn that millions of Americans will lose coverage.
US President Donald Trump’s “One Big Beautiful Bill Act,” aimed at offering tax breaks, reducing government spending, and strengthening border security, also includes a proposal to tax remittances, with limited exceptions.
This move could significantly impact Indians working in the US, as the country has recently surpassed West Asian nations to become the top source of remittances to India.
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According to the RBI’s 6th Round of India’s Remittances Survey, the US was the largest share of remittances at 27.7%, followed by the United Arab Emirates at 19.2%. The country’s total remittances touched $118.7 billion in 2023-24, a crucial component aiding New Delhi’s foreign exchange reserves.
How much tax on remittances?
A key provision in the “One Big Beautiful Bill Act,” proposes to impose a 5% tax, which will be imposed by the service provider (any US bank), who will also be responsible for remitting such tax quarterly to the Secretary of the Treasury. It also states that “The remittance transfer providers have secondary liability for any tax that is not paid at the time that the transfer is made.”
The only relaxation proposed in the bill is the exemption from this remittance tax to verified US citizens and US nationals. These individuals will be classified as “Qualified remittance transfer providers,” by the service provider through a written agreement with the US treasury secretary.
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It is important to note that the bill has not proposed monetary limits as the criteria for exemption but rather chose the nationality of the individual concerned. This would also impact the transfer of smaller denominations and attract a 5% tax.
The move might affect a large number of H1B and L1 visa holders, a large number of them being Indian working professionals. Over 70% of all H-1B visas issued between October 2022 and September 2023 were received by Indian skilled workers, according to data shared in the Rajya Sabha.
