Sending money from the US to India may become more difficult. A new bill passed in the US Congress proposes a 3.5% tax on remittances to countries like India. This will directly impact Indians who send money to their families back home.
Business: This is worrying news for the millions of Indian immigrants in the US. A new bill introduced in the US Congress proposes a 3.5% tax on remittances to countries like India. If enacted, this will directly affect families reliant on financial support from relatives in the US.
What is the new proposal?
The bill is being referred to as the "One Big, Beautiful Bill Act". This proposal suggests imposing an additional tax on money sent abroad, particularly to developing countries. Initially, the rate was proposed at 5%, but after revisions, it has been capped at 3.5%. However, this will be in addition to the existing tax structure.
The aim of this proposal is reportedly to alleviate the US federal budget and increase the flow of funds within the US. However, it could prove to be a setback for remittance-dependent countries like India.
Significant Impact on Smaller Transfers
For example, if an Indian immigrant sends ₹83,000 (approximately $1,000) to their family in India, they would have to pay an additional tax of approximately ₹2,900 if this proposal becomes law. This amount will accumulate with each monthly transfer, potentially becoming a substantial sum annually. This proposal will impact H-1B, L-1, F-1 visa holders and green card holders in the US who often send money to support their families in India.
This also includes students who work part-time alongside their studies to support their parents. Middle-class and lower-middle-class immigrant families, in particular, may be severely affected by this change.
Potential Impact on India
India has long been the world's largest recipient of remittances. In the 2023-24 fiscal year alone, India received $33 billion in remittances from the US. This constitutes approximately 28% of India's total foreign remittances. Therefore, this new proposal could impact India's domestic economy.
Millions of families in rural and small towns rely on money sent by Indian immigrants to cover their children's education, medical expenses, home construction, and other essential costs. An increase in tax will directly affect these essential expenditures.
Growing Concerns Among Indian Immigrants
The proposal has generated considerable discontent and anxiety among the Indian community in the US. They believe this bill indirectly penalizes the immigrant community financially, despite their significant contributions to the US economy. Some Indian organizations have begun protesting, labeling the proposal "unfair and discriminatory." They argue that this tax targets immigrants from developing countries specifically, raising racial and social concerns.
What Can Indian Immigrants Do?
If this proposal is implemented, experts suggest that Indian immigrants may need to alter their money transfer strategies. Specialists recommend the following:
- Avoid small transactions: Transfer larger sums at once instead of frequent small amounts to reduce the tax burden.
- Adopt digital options: Explore digital wallets, cryptocurrencies, and P2P transfer systems. Some options may offer ways to mitigate the tax.
- Plan and seek advice: Consult financial advisors to determine the most cost-effective and secure transfer methods.
