In a significant development affecting the Indian diaspora in the United States, President Donald Trump’s “One Big Beautiful Bill” has passed through Congress. The legislation introduces a 1% tax on remittances sent from the U.S. to foreign countries, including India. While the tax rate has been reduced from the initially proposed 3.5%, it still represents a financial burden for many Non-Resident Indians (NRIs) who regularly send money back home.
What the Bill Entails
The “One Big Beautiful Bill” is a comprehensive piece of legislation that encompasses various tax and spending policies. One of its key provisions is the imposition of a 1% tax on remittances sent abroad by non-citizens. This includes individuals on H-1B and H-2A visas, Green Card holders, and international students. The tax applies primarily to cash-based transfers, while those made via financial institutions or U.S.-issued debit/credit cards are exempt.
Financial Relief Amidst Concerns
While the reduction from a 3.5% to a 1% tax provides some relief, the Indian community in the U.S. remains concerned about the cumulative impact of this tax. With over 4.5 million people of Indian origin in the U.S., including 3.2 million persons of Indian origin such as Green Card holders, temporary visa holders (H-1B, H-2A), and international students, the remittance tax could result in substantial financial outflows. The Indian diaspora has expressed apprehension that this tax may affect investments sent back home and could lead to increased costs for recipients.
Broader Implications of the Legislation
Beyond the remittance tax, the legislation includes provisions that could affect Indian families both in the U.S. and back home. The bill allocates substantial funding for immigration enforcement and national security, supporting Trump’s plan for a large-scale deportation operation. Around 18,000 Indian nationals are identified for deportation due to illegal entry, with the Indian government agreeing to cooperate in their repatriation and curb human trafficking networks.
Legal immigration processes have also become more expensive, with increased fees for asylum, work permits, Temporary Protected Status, and humanitarian parole, alongside the elimination of fee waivers for low-income applicants. The legislation’s broader cuts to Medicaid and support programs are expected to affect both documented immigrants and low-income households, altering the landscape for Indians living and working in the U.S.
India’s Record Remittances and Potential Impact
India has long been the world’s largest recipient of remittances. In the fiscal year 2024-25, remittances from the Indian diaspora reached a record high of $135.46 billion, according to new data released by the Reserve Bank of India. This figure represents a 14% increase compared to the previous year and underscores the significant financial contribution of overseas Indians to the country’s economy.
The introduction of a remittance tax by the U.S. could have implications for these financial flows. While the tax rate is relatively low, the cumulative effect on the vast number of transactions could impact the overall volume of remittances sent to India. Additionally, concerns about increased costs and potential delays in money transfers may affect the financial planning of Indian families who rely on these funds for daily expenses, education, and healthcare.