New U.S. Tax Proposal Alarms NRIs with 5% Remittance Levy

A newly introduced Republican tax bill has sent shockwaves through the Non-Resident Indian (NRI) community in the United States. Unveiled on May 12, the legislation includes a controversial provision: a 5% tax on all international money transfers made by non-citizens. If enacted, the measure could dramatically alter how millions of NRIs support families and manage finances in India.

The proposed tax would apply to all remittances sent abroad by non-U.S. citizens, including those on temporary work or student visas, with the levy collected directly by banks and transfer services at the time of transaction — regardless of the amount or purpose. For a typical ₹1 lakh transfer to India, approximately ₹5,000 would be deducted under the new rule.

The clause is part of a broader Republican initiative to cement the provisions of the 2017 Tax Cuts and Jobs Act. Backed strongly by President Donald Trump in his second term, the bill also seeks to increase the standard deduction and extend the child tax credit to $2,500 through 2028. Trump has hailed the package as “GREAT” and urged swift passage through Congress.

However, the funding strategy behind the tax plan — particularly the remittance levy — has sparked outrage. The revenue generated from taxing remittances is expected to finance extended tax reliefs and border security projects, according to Republican lawmakers. But critics argue that the burden falls squarely on immigrants and temporary residents who already contribute significantly to the U.S. economy.

India stands to be one of the hardest-hit nations. Of the estimated $83 billion in annual remittances India receives, a substantial portion originates from the United States. For many NRIs, these transfers support everyday expenses for their families back home — from education and medical bills to property payments.

With the House aiming to vote on the bill by Memorial Day (May 26) and a Senate decision expected shortly after, the remittance tax could become law as early as July 4. If passed, there would be limited ways for NRIs to avoid the fee, as it would apply uniformly across traditional banking systems and NRE/NRO accounts.

Online forums have exploded with criticism. “Is this really a tax on legal residents too? Or just another way to target immigrants under the guise of reform?” one Reddit user wrote. Another responded, “This will impact nearly every NRI. The U.S. government is effectively taxing our support to our families back home.”

Amid growing confusion, some users speculated that legal residents on visas like H-1B or F-1 might be exempt if they can prove their status to remittance providers. However, no official guidance has been issued on possible exemptions.

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