The new tax proposal by the House of Republicans introduced on May 12, 2025, includes a provision imposing a 5 per cent tax on international money transfers made by non-citizens.
Chennai: In a blow to Indian temporary visa holders as well as green card holders, the US has proposed a new bill to impose 5 per cent tax on international money transfers made by non-US citizens. Some experts are sceptical about the US remittance numbers and anticipate a rise in remittances in other convertible currencies in the future.
The new tax proposal by the House of Republicans introduced on May 12, 2025, includes a provision imposing a 5 per cent tax on international money transfers made by non-citizens. This development depicts a significant shift in US tax policy.
This development is worrisome for Indian temporary visa and green card holders in the US, who send money to their families, and for investment in India. As per this, for every $1000 sent home by an NRI will have to forgo $50 as tax. However, a tax credit could be available against this deducted tax.
India is the largest recipient of remittances in the world with a total inflow of $118.7 billion in FY24 and as per reports this is expected to have gone up to $128 billion in FY25. The US was the top source with nearly 28 per cent in FY24 or over $33 billion in FY24 and $35.84 in FY25. As per the new provision, US NRIs will have to pay $1.79 billion as taxes on their remittances.
The bill, which is likely to be passed by the House of Representatives, is expected to be implemented by June-July. This would see a spurt in remittances prior to the date of implementation and a drop later.
However, some experts are sceptical about the remittance numbers from the US. “The US remittances to India need to be analysed further. A few years before GCC used to be the largest source with around 50 per cent market share. After some global payment aggregators came into the market, the US remittances shot up. I think this could be because of the dollar-denominated remittances made from other parts of the world, which are accounted as US remittances,” said Ashutosh Khajuria, former executive director of Federal Bank.
“If that be the case, we would see the dollar-denominated remittances coming down and those in other convertible currencies going up. Then, there could be a drop in the purported remittances from the US but the total remittances may not decline much,” he said.
