US: Trump Set to Give Shock to NRIs, 5% Remittance Tax on Non-US Citizens Likely

Non-resident Indians (NRIs) are gearing up for another Trump shocker – a 5% tax on their remittances. According to reports, US President Donald Trump, in his latest bid to ‘Make America Great Again’, has proposed a bill to impose a 5% tax on anyone who is not a US citizen and remits money outside the country.

Indians living in the US stand to be impacted once the bill is enacted. As per the Indian Ministry of External Affairs, there are nearly 4.5 million overseas Indians in the US, including 3.2 million Persons of Indian Origin (PIOs).

According to a remittance survey published by the Reserve Bank of India (RBI) in March, a total of $118.7 billion was recorded in remittances in 2023–24. Of this, nearly 28%—amounting to $32 billion—came from the US. Once the bill is enacted, the Indian diaspora could end up paying $1.6 billion as remittance tax.

As of now, remittances sent by NRIs are not taxed in India. Money sent by NRIs to their family or friends in India is not considered taxable income for the recipient, as it is treated as a transfer of funds, not income earned in India.

The remittance is taxable only when it is treated as a gift to someone who is not a close relative (as defined under Indian tax laws) and exceeds ₹50,000 in a year. In such cases, the amount may be taxable in the hands of the recipient.

However, for Indian residents sending money abroad, tax can apply under the Liberalized Remittance Scheme (LRS). Tax Collected at Source (TCS) of 5% to 20% may be levied, depending on the amount and purpose of the remittance.