US President Donald Trump has proposed a new law called the “One Big Beautiful Bill Act.” This bill includes plans to reduce taxes, cut government spending, and improve border safety. However, one key part of the bill is a new 5 per cent tax on money transfers (remittances) from the US to other countries.
Who Will Pay the 5 per cent Tax?
The bill says that a 5 per cent tax will be charged on all remittances, and the US banks or service providers that send the money must collect and pay this tax to the government. If the tax is not paid during the transfer, the service provider will still be held responsible.
Who Is Exempt from the Tax?
Only US citizens and nationals will not have to pay this tax. They must show proof and get a special agreement with the US Treasury. The bill does not give any tax relief based on the amount of money sent. This means even small transfers will be taxed if the sender is not a US citizen.
How This Affects Indian Workers
India receives the highest amount of remittances from the US. In 2023-24, India got USD 118.7 billion, and 27.7 per cent of that came from the US. Most of these remittances come from Indians working in the US on H1B and L1 visas. In fact, over 70 per cent of H-1B visas issued in the last year went to Indian workers.
If the bill becomes law, many Indian professionals may have to pay extra charges to send money to their families in India. This could lower the total money India receives and affect its foreign exchange reserves.
