Thursday, May 15, 2025
The US has introduced a stringent new tax policy that imposes a five percent excise tax on international money transfers made by NRIs, significantly increasing their financial burden. This move not only inflates the costs associated with sending remittances but also directly impacts NRIs’ travel budgets, as more funds are diverted to cover the tax, reducing disposable income for overseas travel and related expenses. The policy aims to generate substantial government revenue but risks disrupting established financial support systems and travel plans for millions of NRIs worldwide.
A new bill introduced in the US Congress seeks to impose a five percent tax on money transfers sent by non-citizens, a move that could impact millions of immigrant workers, including Non-Resident Indians (NRIs). If enacted, this tax would fundamentally change how foreign workers send financial support to their families abroad starting in 2025.
The legislation, championed by House Republicans and endorsed by former President Donald Trump, targets remittances—international transfers of money—sent by non-US citizens residing in the United States. This includes green card holders as well as individuals on various temporary visas such as H-1B, H-2A, and H-2B.
Importantly, US citizens would not be subject to this tax. However, the new rule could affect over forty million foreign nationals living and working legally in the country under diverse visa categories.
Understanding the Five Percent Excise Tax on Remittances
This proposed tax would charge a five percent fee on all outbound international money transfers made by non-citizens. It would apply to lawful permanent residents (green card holders) and holders of temporary work or student visas. The tax collection would be handled at the point of transfer by banks and payment platforms such as Western Union, PayPal, and wire transfer services.
The revenue generated is intended to help fund the permanent extension of the 2017 Tax Cuts and Jobs Act, support the child tax credit through 2028, and enhance border security programs.
Who Will Feel the Impact?
The new remittance tax would apply to:
- Green card holders living in the US
- Temporary visa holders, including H-1B, H-2A, H-2B, F-1 student visa holders, among others
- NRIs sending money home from the United States
- Other foreign nationals legally working and residing in the country
India, which receives an estimated $83 billion annually in remittances, mostly from the US, stands to be one of the most affected countries. For example, sending approximately ₹100,000 (around $1,200) would now incur an additional ₹5,000 (about $60) tax under the new rule.
What Does This Mean Compared to Current Regulations?
At present, remittances sent from the US are not subject to any taxation regardless of the sender’s immigration or citizenship status. This proposed bill represents a significant shift in policy, introducing a direct tax on these cross-border transfers for non-citizens for the first time.
| Feature | Existing Regulation | Proposed Legislation |
|---|---|---|
| Effect on US citizens | No impact | Exempt from the new 5% remittance tax |
| Tax collection method | Not applicable | Tax collected at transaction point by banks and payment services |
| Responsible parties | No tax payers | Non-citizens including green card and visa holders |
| Tax on money transfers | No tax applied | Five percent tax on remittances by non-citizens |
Timeline for Implementation: When Will the Remittance Tax Begin?
- Bill introduction date: May twelfth, 2025
- Expected House approval: By Memorial Day, May twenty-sixth, 2025
- Target date for final presidential signature: July fourth, 2025
Should the bill pass, the five percent tax on international money transfers made by non-citizens could be enforced almost immediately. Financial institutions and money transfer services are expected to start applying the levy on all outbound remittances without delay.
Impact on Immigrant Workers and Their Finances
This tax will particularly affect those who:
- Regularly send money back home to support family members
- Fund overseas education, medical expenses, or property purchases
- Use Non-Resident External (NRE) or Non-Resident Ordinary (NRO) bank accounts to invest or save
The new cost burden is likely to force many immigrants to rethink how they send money abroad. To reduce losses from the tax, some may opt for fewer transfers with higher amounts, although transfers exceeding ten thousand dollars still require reporting under FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act) regulations.
How to Prepare and Reduce the Tax Impact Before It Starts
If the legislation becomes law, consider these steps:
- Transfer funds before July 2025 to avoid paying the five percent excise tax
- Review your remittance habits and consolidate transactions where feasible
- Maintain thorough records of all international transfers to ensure compliance
- Seek advice from financial professionals to optimize long-term financial planning
Broader Implications for Migrants in the US
This proposed tax is part of a wider shift in US immigration and fiscal policy, which places greater financial responsibility on foreign workers while expanding domestic benefits such as child tax credits. Although expected to generate billions in government revenue, the policy may impose significant hardship on immigrant communities.
Moreover, the tax could deter skilled foreign workers from coming to or staying in the US, which may have repercussions for industries like technology, agriculture, and healthcare that rely heavily on migrant talent.
The proposed five percent excise tax on remittances represents more than just a revenue-generating mechanism—it marks a pivotal change in how immigrant workers’ finances are managed and taxed in the United States. For NRIs and countless other foreign workers who support loved ones abroad, this tax could mean thousands of dollars in additional yearly expenses.
The US has introduced a new tax policy imposing a five percent fee on international money transfers by NRIs, which raises travel costs by reducing funds available for trips abroad. This tax increases financial pressure on NRIs by making remittances more expensive and limiting travel budgets.
As the bill advances through legislative processes, it is crucial for affected individuals—whether green card holders, H-1B professionals, students, or other visa holders—to evaluate and adjust their financial strategies promptly. Early preparation will be key to mitigating the impact of this significant new tax.
