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Time of India
27-05-2025
- Business
- Time of India
Remittances tax: How Donald Trump's 'The One Big Beautiful Bill' may turn out to be ugly for Indians in the US
US President Donald Trump's 'The One Big Beautiful Bill' may actually turn out to be ugly for Indians living in the US. By 2026, Indians sending money from the US back home may have to pay a 3.5% remittance tax. Tired of too many ads? go ad free now 'The One Big Beautiful Bill' carries significant implications for many Indian residents in the United States, including holders and permanent residents. International money transfers from the United States to India might become more expensive by 2026 if President Donald Trump's proposed legislation receives approval. The extensive 1,116-page 'One Big Beautiful Bill', which includes tax modifications and expenditure reductions, has received House approval and awaits Senate consideration. The final vote is anticipated in late June or July, with implementation contingent upon passage. The House passed the bill on May 22, reducing the initially proposed remittance tax rate of 5%. The legislation stipulates that only non-US citizens, including permanent residents and employment visa holders, would be subject to this tax. US citizens who incur the 3.5% tax can claim a credit during their tax filing, provided they use verified remittance providers. For Indian nationals, this holds particular importance as they constitute one of the largest immigrant populations in the United States. India Gets Largest Chunk of Remittances From US According to the Migration Policy Institute Data, over 2.9 million Indian immigrants resided in the United States in 2023. The US is Indians' second most preferred global destination after the United Arab Emirates. Statistics also indicate that Indians represent the second-largest foreign-born population in the United States, following Mexicans, comprising 6% of the total 47.8 million foreign-born residents in 2023. Tired of too many ads? go ad free now The US continues to be the largest source of global remittances. RBI's remittance survey released in March indicates that of the total $118.7 billion remittances in 2023-24, the United States contributed approximately $32 billion, which is approximately 28 per cent. How Indians in US will be hit Should this legislation take effect, and even if one were to maintain current remittance levels, the Indian community would face an additional tax burden of $1.12 billion! Even students earning income through various work opportunities would need to pay the 3.5% tax if they wish to transfer their earnings to India upon completing their studies and returning. Also Read | Since there is no minimum amount specified, the taxation applies to remittances of every value. The rule would impact all categories of Indians residing in the US, including those on H-1B visas, L-1 visas (for intra-company transfers), and permanent residents. Any money sent to relatives in India or invested in Indian assets, such as securities or real estate, would be subject to a 5 per cent deduction by the remittance service provider (like a US bank). This regulation is likely to affect individuals who transfer money on a regular basis. Amarpal Chadha, Tax Partner and Mobility Leader at EY India explains, 'The excise tax levy on remittances by US citizens/nationals can either be prevented by remittances through a qualified remittance transfer provider which has entered into written agreement with US Treasury to verify the status of senders as US citizens/nationals or claimed as credit against their income tax liability subject to compliance of certain conditions. ' 'The bill, which aims at curbing US dollar outflows, is currently under Senate review and if enacted, could affect many Indian professionals working in the US, particularly those on H-1B visas or Green Cards, making remittances to India. Indian diaspora in the US may need to wait and watch, and potentially re-evaluate their remittance patterns, including the amount and frequency of remittances from the US,' he told TOI. Also Read | Devesh Kapur, who teaches political science and specialises in diaspora studies at Johns Hopkins University, Baltimore, notes that Indian diaspora generally send about 20 per cent of their income back home, with the amount fluctuating according to their household needs. Sudarshan Motwani, who leads BookMyForex, indicates significant consequences for overseas workers. "These people have gone there for better prospects so that they could support their families back home. They need to send money back home to India. Hence, they will all be subjected to the new 3.5% tax," Motwani told ET. According to Kuldip Kumar, Partner at Mainstay Tax Advisors, this regulation could affect the inflow of funds into Non-Resident External (NRE) accounts and investments in India's premium real estate sector, which has seen increased capital from overseas Indians. Kumar notes that it could also affect corporate mobility programmes where staff are posted to the US and receive US-based compensation. "These employees may seek to negotiate the additional 3.5% cost as part of their relocation package or under tax equalisation arrangements, effectively increasing the salary costs for the companies. Since this levy is classified as an excise tax, it may not fall within the definition of 'income tax' as outlined in tax treaties, and therefore may not be eligible for a foreign tax credit," he told ET. Also Read |
Time of India
26-05-2025
- Business
- Time of India
3.5% remittance tax: Sending money from US to India to upset many; here's what NRIs can do to save tax on remittances
Sending money from the US to India could get costlier in 2026 if President Donald Trump's proposal goes through. The 1,116-page 'One Big Beautiful Bill '—which outlines tax reforms and spending cuts—has cleared the House of Representatives and now moves to the Senate. A vote is likely in late June or July. If passed, the bill will become law. One provision in the bill imposes a 3.5% tax on non-citizens sending money abroad. Before the House passed the bill on 22 May, the proposed remittance tax was 5%. This is of special significance to Indians who are among the largest migrants in the US. More than 2.9 million Indian immigrants lived in the United States as of 2023, making USA the second most popular global destination for Indians after the United Arab Emirates, as per the Migration Policy Institute Data. The data further says that Indians make up the second largest foreign-born group in the United States, after Mexicans, accounting for 6%of all 47.8 million foreign-born residents, as of 2023. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. US citizens exempted The bill exempts US citizens from the remittance tax (referred to as an excise tax). Only non-US citizens—including green card holders and those on employment visas— would be required to pay it. For US citizens, if the 3.5% tax is collected, the bill allows a credit mechanism during tax filing, provided they are verified senders using qualified remittance providers. As per the bill, this privilege is not meant for other people living in the US, like green card holders, professionals on work visas many of whom are Indians. Even students with work-related income—such as from gigs—would have to pay the 3.5% tax if they choose to repatriate the money to India after completing their studies and returning home. Live Events 'The measure is indeed aimed at protecting the outflow of US dollars from the country and encouraging local investment, while also generating an additional stream of revenue,' says Kuldip Kumar, Partner. Mainstay Tax Advisors. What should NRIs do? From the reading of the bill, there is nothing much you could do. The proposed 3.5% tax will shave off a small chunk of the money sent to India every time a remittance is made. This is expected to hit those who send money regularly. Sudarshan Motwani, Founder & CEO of BookMyForex, says that this will have a big impact on those who have gone there to work. 'These people have gone there for better prospects so that they could support their families back home. They need to send money back home to India. Hence, they will all be subjected to the new 3.5% tax,' says Motwani. The share of the US in India's total inwards remittances is the largest; 27.7% in 2023-24 (approximately $32 billion), up from 22.9% in 2016-17, as per RBI's data. 'This measure could impact the flow of funds into Non-Resident External (NRE) accounts and investments in India's booming premium real estate market, which has been increasingly attracting overseas capital from Indians abroad,' adds Kumar. Aside from real estate, Kumar adds that it may impact the mobility programs of corporates with employees who are relocated to the US and are paid in the US. 'These employees may seek to negotiate the additional 3.5% cost as part of their relocation package or under tax equalisation arrangements, effectively increasing the salary costs for the companies. Since this levy is classified as an excise tax, it may not fall within the definition of ' income tax' as outlined in tax treaties, and therefore may not be eligible for a foreign tax credit,' he says. CA Manoj K Pahwa, FEMA & International Tax Consultant's reading of the bill is also similar. He too says that the bill seeks to exempt US citizens and nationals from paying the 3.5% tax. He says that the tax would dissuade Indians to send as much back home as they used to earlier. 'To avoid paying 3.5% tax, many of them would now increasingly invest money in the US itself.' Last but not least, a key question that arises is whether this proposed tax will also affect investments made by Indians in US markets. For instance, if an individual has invested in US stocks or other financial instruments and later wishes to withdraw funds or take some money off the table, would the 3.5% remittance tax apply to such transactions? Kumar says that a very initial, but a rough interpretation, is to check how the investment has been made. For example, if an individual opens a bank account in the US, invests through it, realises the sale proceeds in the same account, and then remits the funds to India, Kumar feels the remittance tax could be triggered in such a case. Another example could be employees receiving stock from a US-based parent company as part of an Employee Stock Option Plan (ESOP). If they later sell these shares and transfer the proceeds to India, the remittance tax may apply in such cases. 'Generally, a depository account is opened in the US in the employee's name. In such cases too this levy may trigger when shares are sold and proceeds remitted to India,' says Kumar. If this is indeed true, there could be a small complication. 'This also raises the issue of whether the remittance tax paid in the US can be claimed as a credit against the Indian tax liability arising from the sale of shares in the US by an ordinarily resident Indian. Since the remittance tax is classified as an excise tax, it may not fall within the scope of taxes covered under the India-US tax treaty. Therefore, that becomes an additional cost and also a consideration for investing in US stocks,' says Kumar. To be sure, the bill has yet to be passed into an Act. Also, further clarifications are awaited, especially about how your US investments and ESOPs would be taxed. 'After all, US may not want to discourage their inward investments,' feels Kumar.
