Donald Trump's 5% tax on remittances: What is ‘One, Big, Beautiful Bill’, what it means for India

The Trump administration is planning to impose a 5 percent tax on outward remittances. In President Donald Trump's big priority bill, there is a proposal for a 5 percent excise tax on remittance transfers that would cover millions of people, including those holding green cards and H1B visas.

Remittances are typically transfers from a well-meaning individual or family member to another individual or household. As per the World Bank, the movement of funds from the country of work back to a home country is known as remittances.

What's Trump admn's new bill on remittances?

A provision proposed under the bill called "The One, Big, Beautiful Bill" states that, “This provision imposes a five percent excise tax on remittance transfers which will be paid for by the sender with respect to such transfers.”

The remittance shall be applied to any international remittance unless the transferor is a “verified US sender.”

"The provision requires that the tax be collected by the remittance transfer providers and the remittance transfer providers are responsible for remitting such tax quarterly to the Secretary of the Treasury," it says.

Notably, no minimum limit has been set in the proposed bill. This means even small transactions will be taxed unless the sender qualifies as a “verified US sender,” defined as a US citizen or national.

These taxes would be withheld by the remittance service provider at the point of transfer, affecting both traditional bank transfers and NRE/NRO account transactions.

"The provision also provides a refundable tax credit for any excise taxes required to be paid by taxpayers with valid Social Security numbers. Lastly, the provision also has an anti-conduit rule," the proposed bill says.

The proposed levy won't be applicable for US citizens. The bill says, “The provision also creates an exception for remittance transfers that are sent by verified US citizens or US nationals by way of qualified remittance transfer providers.”

How will it impact Indians?

If the proposal gets approved, the cost for Indians in the US sending money back home will rise.

Remittances have long been a critical source of income for low- and middle-income countries, and have continued to exceed foreign direct investment (FDI) flows and ODA combined.

An article published in the Reserve Bank's March Bulletin stated, “The share of the US in India’s total remittances remained largest, rising to 27.7 percent in 2023-24 from 23.4 per cent in 2020-21.”

There are nearly 54 lakh overseas Indians in the US, including about 33 lakh Persons of Indian Origin (PIOs), according to Ministry of External Affairs' data.

Most of these individuals are in the US on temporary work visas like H-1B and L-1, or are green card holders who have not yet acquired citizenship, Firstpost reported.

The World Bank said in December 2024 India has been the top recipient of remittances since 2008, with its share in world remittances rising from around 11 per cent in 2001 to about 14 per cent in 2024.

"The top five recipient countries for remittances in 2024 were India, with an estimated inflow of $129 billion, followed by Mexico ($68 billion), China ($48 billion), the Philippines ($40 billion), and Pakistan ($33 billion)," the World Bank said.