NRIs Face 3.5% Tax on Sending Money Home Under New US Proposal
June 2, 2025 — Indian NRIs in the United States may soon face a significant financial burden if a proposed 3.5% excise tax on remittances becomes law under the One Big, Beautiful Bill Act. The measure, which previously proposed a 5% levy, is now under serious consideration and has sparked widespread concern across the Indian diaspora.
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The new provision would apply to remittances made by NRIs living in the US—including those on H1B, L1, F1 visas, and Green Card holders—and would be charged in addition to any existing income tax paid in the United States.
Massive Impact on Remittances and Forex Inflow
According to data from the Reserve Bank of India (RBI), India received approximately $33 billion in remittances from the US in the financial year 2023–24, making up 28% of the total $118.7 billion received globally. Experts warn that this new tax could lead to a significant drop in remittances, ultimately affecting household incomes and domestic consumption in India.
“The proposed tax will significantly affect Indian immigrants who send money to support families in India,” said Bikramjit Bedi, Partner – Taxation at ASA & ASSOCIATES LLP.
“The added burden may deter many from continuing regular remittances.”
Legal and Compliance Hurdles
Beyond the financial impact, the proposal is also raising questions about legal ambiguity and cross-border compliance. Unlike India’s TCS (Tax Collected at Source) system, which provides certain relaxations, the US provision does not offer any exemptions based on the purpose of remittance.
There’s also uncertainty regarding whether this excise tax qualifies for tax credit under the India-US Double Taxation Avoidance Agreement (DTAA). While some argue the tax violates the DTAA’s non-discrimination clause, others believe such clauses apply only to income taxes, not transactional levies.
“Remitters may face enhanced scrutiny,” said Deepashree Shetty, Partner – Global Employer Services, BDO India.
“Banks would need to report detailed data including nationality, remittance amount, and tax paid, adding paperwork for NRIs.”
Concerns from the Indian Diaspora
Many NRIs, especially those on temporary visas, rely heavily on regular remittances to support family back home. The proposed tax could reduce the net amount reaching recipients in India, causing distress among families dependent on these funds.
Shetty added that even a small percentage tax would be an added charge during already financially tight times.
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