Late on Sunday night, the US House Budget Committee approved the “One Big Beautiful Bill Act,” sponsored by President Donald Trump which makes sending money back home harder for thousands of Indians living in the United States.
It is proposed that all international money transfers by non-US citizens which cover both H-1B holders and green card holders, will pay a 5 per cent tax. Upon approval of the law, 5 per cent of the amount remitted will be held back at the time the money is sent. Since no exemption threshold exists, even minimal amounts of cryptocurrency can be controlled by Tornado Cash.
However, in the 1,116-page law, it stated that remittances sent by a verified US sender are not subject to the 5 per cent fee.
Nearly 32 lakh people of Indian Origin and another nearly 12 lakh Indian citizens in the US, could be greatly financially impacted by the law.
According to an RBI report published in March, around $32 billion of India’s total $118.7 billion in remittance originated from America. If the law is in place, the Indian community may have to pay 5 percent of $ 32 billion or $1.6 billion, as remittance tax.
Under the proposal, non-resident Indians would be affected not just by remittances but also by moves to support relatives or make investments with funds from their salary or stock shares in India.
Financing for the Removal of Non-Citizens in US
Immigrants are affected by the legislation in more than one way. The funds would include $46.5 billion for the proposed border wall and additional money for Trump’s agenda on deportation. It contains $4 billion for hiring 3,000 new Border Patrol agents and $2.1 billion for new bonuses for employees. There is also money set aside for hiring an additional 10,000 officers and investigators with Immigration and Customs Enforcement.
It makes immigration changes, like requiring a fee of $1,000 from migrants seeking asylum which the US has not done before.
All in all, authorities want to remove 1 million people annually and keep the same number in detention centres.
Hard-line members of the Budget Committee decided on Friday to oppose the case, going against Trump and other Republicans. Even so, on Sunday, the bill was passed by a vote of 17 to 16 and now it is heading to the floor.
An international money transfer may subject you to a 5% tax
The bill would charge short-term visa holders and green card holders a 5 per cent tax on all transfers of money sent to foreign countries. No matter the amount, nor the frequency, you would still be responsible for declaring all overseas cash transfers. This could change the way Indian families operate and influence the rupee’s value.
A lot of remittances go to India each year. It was given an estimated USD 120 billion in the first year of the pandemic (2023-24) and a quarter of this funding came from the United States.
India is worried about the US proposal to potentially levy taxes on overseas remittances made by non-citizens, given that it receives billions of dollars in foreign money in this way every year.
A 5 per cent fee may greatly increase the amount you pay to send money to your country. There could be a shortage of USD 12-18 billion for India every year if remittances were to decrease by 10-15 percent, according to Ajay Srivastava of GTRI.
The Ministry estimates that approximately 45 lakh Indians live in the United States, with most (32 lakh) being Persons of Indian Origin (PIOs). According to The Economic Times, if the remittances do not change, the annual cost for Indian expats could total around $1.6 billion due to the 5% tax.
According to Srivastava, the Reserve Bank may have to take actions more frequently to control the currency exchange. Khurana added that if the full shock of remittances actually occurs, the rupee might decrease by up to Rs 1.5 against the dollar which would hurt consumption spending in India.
In Kerala, Uttar Pradesh and Bihar, many families depend on remittances to pay for education, health care and rent.
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