A new tax proposal by House of Republicans could significantly impact Non-Resident Indians (NRIs) living in the United States. The bill, introduced on May 12, 2025, includes a controversial provision imposing a 5% tax on international money transfers made by non-citizens. This development depicts a significant shift in U.S. tax policy, especially for foreign workers who regularly send money to their families abroad.
The broader bill aims to make the 2017 Tax Cuts and Jobs Act permanent while increasing the standard deduction and extending the child tax credit to $2,500 through 2028. US President Donald Trump, currently serving his second term, has publicly endorsed the legislation, calling it “GREAT” and urging Republicans to ensure its passage. The 5% remittance tax is intended to help fund extended tax breaks and support border security initiatives, potentially raising billions for the U.S. Treasury. However, it does so at the direct expense of hardworking immigrants.
For NRIs, this tax could have profound financial implications. Currently, India is the world’s top recipient of remittances, with around $83 billion sent annually from abroad, much of it from the United States. The new provision would mean that for every ₹1 lakh (in dollar terms) sent home, ₹5,000 (in dollar terms) would go to the IRS before reaching the intended recipients. This change affects everyday family support, property purchases, educational expenses, and more. Until now, remittances were not subject to U.S. taxation, making this a stark policy reversal.
How will the bill impact the NRIs?
The legislative timeline is swift. The House aims to pass the bill by Memorial Day, May 26, 2025, after which it would head to the Senate. Lawmakers hope to have it signed into law by July 4th. If approved, the tax would be implemented rapidly, with financial institutions and money transfer services tasked with collecting the 5% levy at the point of transaction, regardless of the amount or purpose of the transfer.
This could substantially disrupt existing financial strategies for NRIs. Whether you’re supporting aging parents, funding a sibling’s education, or investing in real estate back home, you’ll now face a reduced value on every dollar you send. The tax applies across all legitimate channels, including traditional banks and NRE/NRO accounts, leaving few options for avoidance without breaching compliance.
Given the urgency, NRIs are advised to take swift action. Large or planned remittances should ideally be made before July to avoid the new tax. Reconsidering your remittance habits might also help mitigate the impact. For instance, fewer and larger transfers might reduce the cumulative cost, though care must be taken to comply with U.S. reporting requirements for international transactions over $10,000, which will continue under FBAR and FATCA regulations.
In the long run, if the bill passes, NRIs will need to reassess their financial and tax planning. Budgeting for the additional cost, reviewing investment strategies, and exploring alternative ways to support families will become necessary. Proper documentation of transfers will become even more important—not just for tax filings, but also for future legal and financial clarity. The proposed 5% remittance tax represents a significant change for NRIs in the U.S. Meanwhile, the bill is yet to become a law in the US.