Indian Immigrants Get Break as Senate Bill Waters Down Remittance Tax

Indian nationals in the United States who send money back home are cautiously celebrating a move by Senate Republicans to cut down a planned tax on the funds.

In revisions of so-called Big Beautiful Bill making its way through the Senate, a tax on remittances, which passed the House of Representatives at 5 percent, was cut to 3.5 percent and then further to 1 percent. It is also now limited to only certain money transfers.

The U.S. sent $80 billion in outward remittances in 2022, according to the World Bank, making it the largest sender of remittances in the world. India is the world’s top receiver of remittances.

Under the legislation, immigrants who send wages home via wire transfers will still be taxed, though money sent via banks will now be exempt. That would be welcome news for high-earning, short-term migrants, such as tech workers from India.

“Their families back here in India are already good financially. So, it’s not that they’re very actively dependent on the money that’s being sent from here,” Alok Dubey, a financial advisor and chief executive officer of PrimeWealth in India, told Newsweek. “The people who are much relieved are the guys who eventually wanted to come back sometime.

“It might be two years, it might be five years, it might be 10 years. So, they are the guys who are more relieved as compared to somebody who sends his wages for the family to take care of themselves here in India.”

Why It Matters

A tax on remittances was framed as a way to recoup some of the money immigrant workers send back home and keep it circulating within the U.S. economy. In 2023, the last full year of data available, over $650 billion was received in remittances by countries worldwide, with around a third of that coming from the U.S. In some countries, remittances from the U.S. account for full percentage points of their GDP.

Watering down the remittance tax will come as a blow to those on the right calling for tougher measures around immigration, both legal and illegal.

What To Know

There were warnings when President Donald Trump’s budget bill was in the House of Representatives that the original 5 percent remittance tax would have significant impacts on the receiving nations.

India received over $119.5 billion in remittances from its citizens around the world in 2023, according to the Indian government. Nearly 30 percent of that is believed to come from the 2 million Indian nationals living and working in the U.S.

The country has also seen one of the steadiest rises in remittances, according to World Bank data, with experts saying these funds provide a lifeline for immigrants’ families back home. Remittance money is often used to cover utilities, housing costs, and groceries, but can also be used as investments.

Under the version of the bill currently up for a vote in the Senate, the 1 percent tax would only apply to cash or physical payments handed to money transfer providers, and not payments made through bank accounts or payment cards. This is a change from the House version of the bill, which taxed all remittances at 5 percent.

The Immigration Accountability Project (IAJ), which advocates for tougher immigration reform, has expressed its dismay at the cutbacks to the initial measure, telling Newsweek that it will be a loss in revenue for the U.S.

“Republican Senators seem to be more afraid of the lobbyist from big banks than they are of those from Western Union and MoneyGram. That’s the only thing that that I can see,” Chris Chmielenski, President of the IAJ told Newsweek.

The Congressional Budget Office (CBO) initially estimated around $22 billion per year could be raised through the 5 percent tax. At 1 percent, that figure is now well below $10 billion. The IAJ argues this is tax revenue not generated by American citizens, which the federal government will now miss out on.

Dubey told Newsweek that many wealthy Indian immigrants split their financial assets, with roughly 70 percent staying in the U.S. and 30 percent going back to India. Since the first proposal of a remittance tax, there has been a steady outflow of money from the U.S. as immigrants look to avoid taxation at a later time when they head home for good.

Removing the requirement for remittance taxes on bank transfers, where larger assets may be stored, will likely take the pressure off the money immigrants are storing in U.S. accounts awaiting a later transfer, but Dubey said large sums have likely already been moved without the tax in place.

What People Are Saying

Chris Chmielenski of IAJ, speaking to Newsweek: “I’m pretty disappointed with the developments which have occurred. Disappointed, not just because you know this this is a potential stream of revenue that I don’t think a whole lot of Americans are going to really complain about. I think they would view it as somewhat reasonable to be taxing money sent back to foreign money earned here in the United States that’s sent out of the country to foreign countries.”

Alok Dubey, of PrimeWealth, speaking to Newsweek: “I don’t think it’s going to stop someone from coming, even if you pay 3.5 percent. The opportunities in the U.S. and just the currency is so high. Let’s say I was saving $1,000 and I’m saving just $30 less, then it doesn’t create that difference, because if I convert things to my currency, it’s a very big amount.”

U.S. Tech Workers, part of The Institute for Sound Public Policy, on X: “Senate Republicans are watering down the remittance tax from 3.5% to just 1%. House GOP BBB passed 5%, but the Senate caves — again! So, H-1Bs replace American workers, then get rewarded for wiring U.S. wages to countries profiting off our offshored jobs. Absolute betrayal!”

What’s Next

The tax bill is still working its way through the Senate. If passed, it would head back to the House for a final vote as part of the reconciliation process before going to President Trump’s desk.