Proposed 5% Remittance Tax Will IMPACT Your Money Transfers to India from US | NRI
A new bill proposed in US Congress called 'The One Big Beautiful Bill' includes a 5% tax on international remittances by non-US citizens. This would impact H1B, L1 visa holders, and green card holders. If it passes, it could take effect as early as July 2025.
Proposed 5% Remittance Tax Will IMPACT Your Money Transfers to India from US
Are you sending money home to India? A new US bill could cost you thousands. The proposed 5% remittance tax targets H1B, L1 visa holders, and even green card holders. If you're sending $3,000/month, that's $1,800 gone every year. Here's what you need to know before it potentially takes effect.
⚠️ Key Alert
- 5% tax on ALL international remittances by non-US citizens
- Affects H1B, L1, all visa holders AND green card holders
- Could take effect as early as July 2025 if passed
- No minimum amount — applies to $100 or $10,000 transfers
- Tax collected at source before money leaves your account
What is the Proposed 5% Remittance Tax?
A new bill proposed in US Congress called "The One Big Beautiful Bill" includes a 5% tax on international remittances by non-US citizens.
In Simple Terms
If you are a non-US citizen and you send money from the US to any other country, you would pay a 5% tax on the total amount sent.
This would apply to:
- H1B visa holders
- L1 visa holders
- All other visa holders
- Green card holders
Example: An NRI sending $1,000 to India could be charged $50 in tax right at the source.
The stated goal is to generate revenue and discourage the use of US taxpayer-funded services by non-US citizens. But the direct impact? It hits immigrant families hard — especially those who support loved ones back home.
The tax would be collected by the financial institution or remittance service before the money leaves your account. This tax is collected at the source and given to the US government.
If you're already planning your return to India, this is another factor to consider. Check out our guide on how to legally transfer money from India to abroad for the reverse scenario.
Who Will Be Affected?
| Category | Affected? |
|---|---|
| H1B Visa Holders | ✅ Yes |
| L1 Visa Holders | ✅ Yes |
| All Other Visa Holders | ✅ Yes |
| Green Card Holders | ✅ Yes |
| US Citizens | ❌ No (Exempt) |
⚠️ Important: Only US citizens are exempt from this international remittance tax. If you are on a visa or are a green card holder, you are likely to be affected.
How This Would Affect NRIs
For many NRIs, remittances are not optional — they are essential. They help pay for:
- Elder care
- Children's education
- Medical bills
- Day-to-day living expenses for family
💰 The Real Cost
Imagine you're sending $3,000 a month:
- Monthly tax: $150
- Annual tax: $1,800 gone
Think of it like this — all the savings that you have, you have to pay 5% when you want to transfer that money to India. That's huge.
Broader Impact
It's not just about individuals. India is one of the top recipients of global remittances. From the US alone, there was $37 billion remitted annually.
This tax could:
- Discourage legal transfer of money
- Push people towards informal or unsafe money transfer routes
- Increase chances of fraud or loss
What We Know So Far
Current Status
- The bill is still under discussion
- If it passes, it could take effect as early as July 2025
- Only US citizens are exempt from this tax
- No lower limits — whether you're sending $100 or $10,000, the tax applies across the board
Common Questions We're Hearing
Does this apply to NRE or NRO accounts?
Yes. If you're transferring funds from the US, the tax applies before it hits your Indian account. The 5% is deducted at the source before the transfer happens to your Indian bank account.
Can we avoid this by splitting transfers or using different services?
Not really. The tax is per transaction irrespective of the amount, and most formal services will be required to comply with this new rule once it becomes law.
Are there exemptions for education or medical transfers?
As of now, no specific carve-outs have been mentioned in the bill.
What You Can Do
This might sound frustrating, but here are the steps you can take:
Stay Informed
Follow updates on this bill. We will continue to cover it here.
Plan Ahead
If you are planning for a major remittance, consider sending them earlier before this tax potentially could take effect. If you're moving from US to India, this is another big thing you need to plan.
Talk to Your Financial Advisor
Explore options, alternate legal remittance channels, and how this affects your broader investment plans. Plan accordingly.
Keep Documentation
In case of audits or future tax reviews, you want to have that paper trail.
💡 Remember: Yes, this proposal is concerning, but being proactive is our best strategy. Financially, legally, and as a community, we can face it together.
Planning to Move from US to India?
If you're considering moving back to India, this tax is another factor to consider in your financial planning. Get comprehensive guidance on managing your transition.
Stay Updated on NRI Policy Changes
We'll keep you updated with the latest developments and expert advice on this bill and other policies affecting NRIs.
Stay informed, stay connected, and take care.
Frequently Asked Questions
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