New Delhi: At a time when US President Donald Trump’s ‘tariff war’ on several countries, including India, has given sleepless nights to the concerned governments, India is gearing up for another shock as the US Republican House has proposed to impose a 5 percent tax on the money sent abroad by non-citizens in a bill introduced on May 12, 2025.
After the passage of the Bill, the non-resident Indians (NRIs) in America will be mandated to pay tax on sending money to their family in India. It is a big setback, as the Indian government earns a good income from the money coming from abroad.
The Trump administration has announced that the proposed legislation aims to permanently establish the Tax Cuts and Jobs Act of 2017, enhance the standard deduction, and raise the child tax credit to $2,500 by the year 2028. The Bill has a strong backing of President Trump. He has described the bill ‘excellent’ and has appealed to the Republicans to pass it soon. The purpose of the 5% remittance tax is to raise funds through it and strengthen border security.
Impact on India
The NRIs in the United States will be impacted with the passing of the Bill as they will be required to pay tax for sending money to their family members in India, which will cost them more money. The Indian government’s coffers will also be hit as it receives a significant remittance. Approximately, 83 billion dollars come from abroad every year in the form of remittance, most of which is from America.
But under the new proposed Bill, for every Rs 1 lakh (in dollars) sent, 5,000 rupees (in dollars) will have to be paid as tax to the IRS. The extra cost will impact family assistance, property purchase, education expenses and other needs.
The Trump administration (Republicans) has set a target of May 26, 2025 to pass the remittance tax policy by May 26, 2025, after which it will go to the Senate. Lawmakers plan to pass it into law by July 4. After the proposed Bill is passed, banks and money transfer services will levy a 5% tax on every transaction which will have an impact on the pocket of the NRIs. This tax will apply to all legitimate channels, such as banks and NRE/NRO accounts.
A proposed US bill introduces a 5% tax on remittances sent abroad by non-citizens, significantly impacting Indian NRIs. This tax, aimed at raising funds and bolstering border security, could reduce remittances to India by billions of dollars annually. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
