A proposed bill in the United States is making waves across immigrant communities—especially among the Indian diaspora. The legislation seeks to impose a 5% excise tax on all international money transfers, a move that could significantly impact the 2.3 million Indians living and working in the US. Far from being a routine policy change, this proposal threatens to reshape the financial lifeline that connects Indian families across continents.
In 2023 alone, Indian-origin residents in the US sent over $23 billion to loved ones back home. These funds were crucial not just for daily support but also for property investments, education expenses, and business funding. Should this bill pass, every dollar remitted will carry a 5% surcharge—adding a costly layer to routine financial transactions.
Take, for example, a family sending $1,000 each month to elderly parents in India. Under the new tax regime, $50 would be deducted as excise tax, amounting to a $600 annual loss. To ensure the full $1,000 still reaches their parents, senders would have to wire approximately $1,052.63, absorbing the tax themselves.
The financial burden grows with larger transfers. Sending $10,000 for a child’s college fees or for purchasing property would attract a $500 tax, requiring a sender to remit $10,526.32 to ensure the full amount reaches India. Even smaller remittances aren’t spared—someone sending $200 a month would see $10 lost each time, totaling $120 annually. That’s money that could have paid for essentials like groceries, medicines, or utilities.
What’s alarming is the scope of the tax. It reportedly applies not just to H-1B or F-1 visa holders, but also to green card holders and NRIs earning from investments or stock options in the US. There’s no lower threshold, no exemption for small transfers—every dollar remitted is subject to the 5% tax.
With US-based remittances making up about 28% of India’s total inflows—roughly $32–33 billion annually—this policy could siphon off $1.6–1.7 billion from Indian households and businesses. These are not negligible figures; they could disrupt families’ ability to pay rent, afford education, or cover medical bills.
Experts are raising red flags about potential double taxation, as the remitted funds have already been taxed as income in the US. Worse, there’s no clarity yet on whether NRIs will be eligible for any tax credits to offset these deductions.
The ripple effects could be widespread and damaging. Real estate developers in cities like Mumbai, Delhi, and Hyderabad are bracing for reduced NRI investment. India’s foreign exchange reserves could take a hit if remittance volumes fall. There’s also concern that this may push some into unregulated, riskier channels like hawala, undermining formal financial systems.
With the tax potentially going into effect by July 2025, NRIs are being advised to accelerate large transfers and revisit their remittance strategies. Whether that means adjusting the frequency or amount, or exploring new financial tools, one thing is clear: this isn’t just a policy change—it’s a paradigm shift for Indian families living abroad.
