A new tax proposal in the U.S. House of Representatives could introduce a 5% tax on money sent home by non-citizens, which includes millions of Non-Resident Indians (NRIs). This bill aims to make the 2017 Tax Cuts and Jobs Act permanent, extend the child tax credit, and increase the standard deduction.
To fund these benefits and enhance border security, the government wants to tax international money transfers from immigrants. This is a significant change in U.S. tax policy. Currently, India receives about $83 billion annually in remittances, primarily from the U.S.
Under the proposed tax, for every ₹100,000 sent to India, ₹5,000 would be deducted before the money reaches the recipient. This tax could impact the financial support NRIs provide for their families in India for everyday expenses, education, healthcare, and property investments.
The tax would apply to all legal transfer methods, including banks and accounts for non-resident Indians. This means there will be limited ways to avoid the tax without breaking the law. The House plans to vote on the bill around Memorial Day in 2025, and the Senate is expected to act quickly afterward. If the proposal becomes law by July 4th, the tax will be collected at the time of the transfer through financial institutions.
NRIs are advised to consider sending any planned remittances before the law takes effect and to reassess their financial strategies. This 5% remittance tax requires careful planning and budgeting for those affected.
It’s currently unclear whether the 5% tax will also apply to transactions made by non-profit organizations, like TANA and ATA, or to business transactions. Further clarification on this is needed.
