Indians in US may have to pay 5% tax on money sent home; New Trump bill seeks remittance tax for migrants

A new proposal under the Trump regime is triggering anxiety among Indian professionals and students in the US, not over visas or deportation, but over remittances. A bill introduced in the US House of Representatives on May 12 proposes a 5% tax on money sent from the US to foreign countries by non-citizens, including Green Card holders and workers on H-1B or H-2A visas.

The provision is part of a broader legislative package titled The One Big Beautiful Bill, aimed at overhauling immigration and fiscal policy. If passed, the bill could significantly increase the cost of sending money home for millions of immigrants, especially Indians, who form one of the largest diasporas in the US.

According to World Bank data from 2024, India received $129 billion in international remittances, with 28% of that coming from the US. The Global Trade Research Initiative (GTRI) warned that the proposed tax could reduce remittances to India by 10–15%, amounting to a shortfall of $12–18 billion annually. Founder Ajay Srivastava said, “The rupee could weaken by Rs 1–1.5 per US dollar if the remittance shock plays out fully.”

Tax lawyer Ajay Rotti also noted: “This will impact all Indians on long-term visas and Green Cards in the US sending money home. It impacts H-1B workers also. Billions of dollars were remitted last year.”

States like Kerala, Uttar Pradesh, and Bihar, which are highly dependent on remittance inflows, could face a ripple effect. “Remittances are a lifeline for many families,” Srivastava said. “A sudden decline could hit household consumption at a time when India is already navigating global inflationary pressure.”

The proposed tax has alarmed Indian workers and students alike. Saurabh Arora, Founder and CEO of University Living, told Business Today, "The proposed 5% excise tax on outbound remittances from the US is a policy under consideration that may influence how Indian students manage their personal finances while studying abroad. Many students begin contributing back home, whether by supporting their families or repaying education loans, once they start part-time work or move into full-time roles post-graduation."

"For such students, even a modest change in remittance costs can shape how they plan and prioritise financial decisions. While the policy is still in discussion, it brings attention to the importance of financial preparedness for students navigating life abroad."

According to chartered accountant Shree Ram Raut, “The 5% tax could cost India approximately $1.6 billion annually,” based on the $32 billion remitted by 4.5 million Indians in the US in FY2023–24.

The backlash isn’t limited to India. Mexican President Claudia Sheinbaum called the bill “a measure that is unacceptable” and said her government would reach out to other immigrant-heavy countries.