Key Takeaways
• Remittances tax imposes 3.5% fee on money sent abroad by non-US citizens and green card holders.
• About 4.5 million Indians in the US may face extra costs sending billions in remittances to India.
• Tax withheld by money transfer companies quarterly; no relief under India-US tax treaties applies.
Donald Trump’s “One Big Beautiful Bill” is making headlines across the United States 🇺🇸 and around the world. The bill, which recently passed the House Budget Committee in late May 2025, includes a controversial new remittances tax that could have a major impact on millions of Indians living and working in the United States 🇺🇸. As the bill moves closer to becoming law, many are asking: Who will this tax affect, how will it work, and what does it mean for Indian families and the broader immigrant community?
What Is the Remittances Tax and Who Will It Affect?
The remittances tax is a new rule included in President Trump’s “One Big Beautiful Bill.” If it becomes law, it will require non-US citizens to pay a tax on any money they send abroad. This means that many people who live and work in the United States 🇺🇸 but are not citizens—including H-1B and L-1 visa holders, F-1 students, and even green card holders—will have to pay extra when they send money to their families in other countries.
Key facts about the remittances tax:
- Tax Rate: The original proposal was a 5% tax on all international money transfers by non-US citizens. After negotiations, the rate was reduced to 3.5%.
- Who Pays: The tax applies to non-immigrant visa holders (like H-1B, L-1, and F-1 visas) and green card holders. Only US citizens and nationals are exempt.
- No Minimum: There is no exemption for small transfers—even small amounts sent home will be taxed.
- How It’s Collected: The tax will be withheld at the time of transfer by the company sending the money (like Western Union or MoneyGram).
- Who Collects: Remittance service providers must collect the tax and send it to the US Treasury every three months.
- Exemptions: Only “verified US senders” (US citizens or nationals) will not pay the tax.
This new tax is especially important for the Indian community in the United States 🇺🇸, which is one of the largest immigrant groups and sends billions of dollars home each year.
Why Is This Important for Indians in the United States 🇺🇸?
Indians make up a large part of the US immigrant population. There are about 4.5 million Indians living in the United States 🇺🇸, and nearly 3.2 million are Persons of Indian Origin. Many of these individuals regularly send money—called remittances—to support their families in India 🇮🇳.
India is the world’s largest recipient of remittances from the United States 🇺🇸. In the 2023-24 financial year, Indians received about ₹32.9 billion (over $400 million) from the United States 🇺🇸, which is nearly 28% of all money sent to India from abroad. This money helps pay for education, health care, and daily living expenses for families back home.
If the remittances tax becomes law, it will add a new financial burden for:
- H-1B visa holders: Many are Indian tech workers who send money home to support parents, spouses, or children.
- L-1 visa holders: Employees transferred from Indian companies to US offices.
- F-1 student visa holders: Indian students who sometimes send money to family or receive support from home.
- Green card holders: Permanent residents who are not yet US citizens.
These groups already pay 5% to 10% in fees to money transfer companies. The new tax would be in addition to those fees, making it even more expensive to support families in India 🇮🇳.
How Will the Remittances Tax Work?
The remittances tax is designed to be simple for the government to collect but could be complicated for individuals and companies. Here’s how it would work:
- When you send money abroad, the remittance company (like Western Union or MoneyGram) will check if you are a US citizen or not.
- If you are not a US citizen, they will withhold 3.5% of the amount you send as a tax.
- The company will send the tax money to the US Treasury every three months.
- You will not get any credit for this tax on your US or Indian tax returns, because it is not considered an income tax.
For example, if an H-1B visa holder sends $1,000 to family in India 🇮🇳, the remittance company will take $35 as a tax, plus their usual service fee. The family in India 🇮🇳 will receive less money, and the sender will have to pay more to make up the difference.
What Do Experts Say About the Remittances Tax?
Tax and Financial Experts
Akhilesh Ranjan, a former member of India’s Central Board of Direct Taxes, points out a big problem: This tax is not on income, so it does not qualify for relief under the Double Taxation Avoidance Agreement (DTAA) between India 🇮🇳 and the United States 🇺🇸. This means Indians who pay the remittances tax in the United States 🇺🇸 will not get any credit for it when they file taxes in India 🇮🇳.
Sandeep Jhunjhunwala, a partner at Nangia Andersen LLP, says the tax seems to unfairly target legal immigrants. He also notes that it is not clear if people with Social Security numbers (who may be long-term residents) will be exempt, or if only citizens are safe from the tax.
Economic Experts
Many economists argue that the idea behind the remittances tax is flawed. Some US lawmakers claim that sending money abroad “drains” the US economy. But, as economists explain, dollars sent abroad usually come back to the United States 🇺🇸 because foreign countries cannot use US dollars for their own spending. Instead, they use the dollars to buy US goods, invest in US companies, or pay for services.
Indian Government Response
So far, Indian government officials are being careful. One official said, “It’s a proposal. We don’t react so quickly to things. Let us see what happens.” This shows that India 🇮🇳 is watching the situation closely but has not taken any official action yet.
What Else Is in the “One Big Beautiful Bill”?
The remittances tax is just one part of a much larger bill. President Trump’s “One Big Beautiful Bill” includes many other tax changes that affect both citizens and non-citizens:
- No taxes on tips and overtime pay through 2028
- Tax deductions for auto loan interest, starting from January 1, 2025
- Extra $4,000 standard deduction for seniors aged 65 and older who do not itemize deductions
- Permanent extension of the 2017 Tax Cuts and Jobs Act
- Higher cap on State and Local Tax (SALT) deductions—up to $30,000 per couple
- End of electric vehicle tax credits by 2026
- Higher taxes on large university endowments
While some of these changes may help certain taxpayers, the remittances tax stands out because it directly targets immigrants, especially those who send money to family members abroad.
What Are the Main Concerns About the Remittances Tax?
Financial Burden on Immigrants
The biggest concern is that the remittances tax will make it much more expensive for immigrants to support their families. Many Indian families rely on money sent from the United States 🇺🇸 to pay for basic needs, education, and health care. Even a small tax can add up over time, especially for people who send money home every month.
Double Taxation and No Relief
Because the remittances tax is not an income tax, there is no way to get a tax credit or deduction for it. This means Indians who pay the tax in the United States 🇺🇸 will not get any relief when they file taxes in India 🇮🇳. This is different from other taxes, where international agreements sometimes allow people to avoid being taxed twice on the same money.
Push to Informal Channels
Some experts worry that the tax will encourage people to use informal or illegal ways to send money home, such as giving cash to friends traveling to India 🇮🇳 or using unregistered money transfer agents. This could make it harder for governments to track money flows and could increase the risk of fraud or crime.
Discrimination Against Legal Immigrants
Critics say the remittances tax is unfair and discriminatory because it only applies to non-citizens, even if they are living and working in the United States 🇺🇸 legally. Boston Globe columnist Jeff Jacoby called it an “ugly tax” that goes against the idea of supporting families and lowering taxes.
Impact on India 🇮🇳 and Other Countries
India 🇮🇳 is the largest recipient of remittances from the United States 🇺🇸, but other countries like El Salvador, Honduras, and Guatemala also depend heavily on money sent from abroad. For some of these countries, remittances make up a large part of their economy. The new tax could hurt these countries’ economies and create diplomatic problems between the United States 🇺🇸 and its partners.
What Happens Next?
The “One Big Beautiful Bill” has passed the House Budget Committee and is moving through Congress. The next steps are:
- Debate and vote in the full House of Representatives
- Possible changes in the Senate
- Final approval by President Trump
As the bill moves forward, several things could change:
- The remittances tax rate could be changed again (higher or lower)
- Some groups could be exempted (for example, green card holders or long-term residents)
- The tax could be removed from the bill if there is enough opposition
If the bill becomes law, it will take effect quickly, and remittance companies will have to start collecting the tax right away.
What Should Indians in the United States 🇺🇸 Do Now?
If you are an Indian living in the United States 🇺🇸 and you send money home, here are some steps you can take:
- Stay informed: Follow news from trusted sources like USCIS.gov for updates on immigration and tax policies.
- Talk to your remittance provider: Ask how the new tax might affect your transfers and what documentation you may need.
- Plan your finances: If you send money home regularly, consider how the extra cost will affect your budget.
- Consult a tax professional: If you are unsure about your status or how the tax might apply to you, get advice from a qualified tax expert.
What Are the Broader Implications?
The remittances tax is part of a larger debate about immigration, taxes, and the role of immigrants in the United States 🇺🇸. Supporters of the tax say it will raise money for the government and discourage illegal immigration. Opponents say it unfairly targets legal immigrants and could hurt families and economies both in the United States 🇺🇸 and abroad.
According to analysis by VisaVerge.com, the remittances tax could have far-reaching effects not just for Indians in the United States 🇺🇸, but for the global flow of money and the relationship between the United States 🇺🇸 and countries like India 🇮🇳. The bill’s progress will be closely watched by financial institutions, immigration advocates, and foreign governments.
Conclusion: What’s at Stake?
President Trump’s “One Big Beautiful Bill” and its remittances tax represent a major change in US tax policy. For millions of Indians and other immigrants, the new tax could mean higher costs, more complicated finances, and tough choices about how to support family members abroad. As the bill moves through Congress, it is important for affected individuals to stay informed, plan ahead, and seek professional advice if needed.
For more information about current US immigration and tax policies, visit the official USCIS website.
The coming weeks will show whether the remittances tax becomes law and, if so, how it will shape the lives of Indians and other immigrant communities in the United States 🇺🇸.
Learn Today
Remittances tax → A new tax on money non-US citizens send internationally from the United States.
H-1B visa → A US non-immigrant visa for specialized workers, mainly in technology and business.
Green card holder → A permanent US resident authorized to live and work but not a citizen.
Double Taxation Avoidance Agreement (DTAA) → A treaty preventing income tax being paid twice by the same person.
Money transfer providers → Companies like Western Union that send funds internationally and collect taxes.
This Article in a Nutshell
President Trump’s ‘One Big Beautiful Bill’ includes a 3.5% remittances tax affecting noncitizens. Indians in the US could face higher costs sending money home, impacting families and raising concerns about financial burden and fairness.
— By VisaVerge.com
