Ajay, an Indian American engineer, has lived in the United States for over 35 years. His elderly mother, aged 90, continues to reside in Mumbai, India, where she is looked after by a nurse and domestic help. Though she used to visit Ajay, declining health and the need for constant care led her to stay in India permanently. For Ajay, this has brought emotional strain as well as logistical and financial burdens, as he juggles the responsibilities of long-distance caregiving.
Like many others in the Indian diaspora, Ajay sends money monthly to support his mother’s needs, including salaries for her caregivers. He uses platforms like Remitly for these transactions. However, a newly proposed remittance tax in the U.S. may complicate this simple act. The looming legislation could soon impact how immigrants like Ajay manage cross-border financial responsibilities.
Hidden within the sweeping legislative proposal titled the “One Big Beautiful” bill is a provision that threatens to reshape the landscape for foreign remittances. It calls for a 3.5% tax on money sent abroad by foreign workers, including those holding green cards and temporary work visas such as the H-1B. For a country like India—which leads the world in remittance receipts—this could trigger serious financial and social repercussions.
Though U.S. citizens such as Ajay are officially exempt from the proposed tax, there’s a caveat. They will still be required to verify their citizenship status every time they send money, a new bureaucratic hurdle in what has traditionally been a routine transaction. More worryingly, this added requirement may open the door to privacy breaches and fraudulent schemes.
During a June 6 briefing hosted by American Community Media titled Taxing Remittances—A New Front in War on Immigrants, experts expressed concern about the tax’s wide-ranging effects. They emphasized that in many lower-income nations, remittances account for up to 30% of GDP. Advocates highlighted the regressive nature of this tax, calling it a form of double taxation. “Millions of undocumented immigrants already pay income taxes,” they noted. Imposing another layer of taxation may prompt people to explore risky, informal channels for sending money home.
India’s economy relies heavily on remittance flows. According to the Migration Policy Institute, many of the 2.9 million Indian immigrants living in the U.S. regularly transfer money to support families, fund businesses, or repay student loans. The Reserve Bank of India reports that India’s remittances rose from $55.6 billion in 2010-11 to $118.7 billion in 2023-24, helping to offset half the country’s goods trade deficit and even exceeding foreign direct investment levels.
India has topped the global remittance chart since 2008. The World Bank places India’s share at 14% of worldwide remittance inflows in 2024, up from 11% in 2001. Projections from the Reserve Bank of India suggest that remittances may reach $160 billion by 2029. Historically, these inflows have made up about 3% of India’s GDP. A BBC report further states that remittances in India serve multiple roles: from covering basic household expenses to investing in property, gold, or small businesses, according to the Centre for WTO Studies in Delhi.
A reduction in remittance flows could result in less saving and reduced investment activity. Families might be forced to scale down future-oriented spending and prioritize essentials like healthcare, food, and education instead.
The “One Big Beautiful Bill,” introduced by Republicans, is a wide-ranging legislative proposal that tackles tax reforms, spending limits, and border security. Nestled within its more than 1,000 pages is the 3.5% remittance tax clause.
Ariel Ruiz Soto, Senior Policy Analyst at the Migration Policy Institute, explained during the ACom briefing, “One is trying to use this as a method of collecting money to subsidize or to cover the deficit for the bill that they’re advancing.” But he raised a more pressing concern: “The mandate on non-US citizens means that the administration will be able to collect citizenship data, or legal status information of those immigrants.” Soto added, “Remittance agencies like Xoom or Remitly, or Western Union are going to carry the burden of trying to ask who is an immigrant, or what their immigration status will be.”
This administrative overhaul carries significant risks. Money transfer firms, including banks, cryptocurrency platforms, and non-banking financial institutions, will have to register with the U.S. Treasury and build systems capable of verifying both citizenship and tax status. Dr. Manuel Orozco, a senior advisor for the International Fund for Agricultural Development, issued a stern warning: “There is not a single private entity that is authorized to collect information about your citizenship status.”
Dr. Orozco further noted that cybercriminals could exploit this new system to obtain sensitive information like citizenship and tax identification. “No one carries that stuff around,” he said, referring to documents like passports and naturalization certificates. “How will a bank confirm a money transfer is performed by a U.S. citizen?”
The prospect of rising costs and increased surveillance could also drive some immigrants toward illegal or informal money transfer systems. Ajay commented, “Hawala is an illegal way to transfer money that gives rise to unnecessary fraud.” The Hawala network operates on informal trust-based systems and is especially popular in South Asia. While it does not involve actual cross-border money movement, its reliance on off-the-books ledgers makes it illegal in the United States under anti-money laundering regulations.
India Currents also contacted the Financial Technology Association (FTA), which joined six other trade groups in a letter to Senators Mike Crapo and Ron Wyden, urging them to exclude the remittance tax and verification requirement from the reconciliation bill. The FTA warned of a “significant invasion of privacy” that would negatively affect everyday Americans, including military families and students abroad.
Penny Lee, President and CEO of the FTA, emphasized, “We should not be asking everyday Americans to hand over their sensitive personal information or pay a tax to send money to families serving overseas or studying abroad.” She added, “This proposal not only infringes on Americans’ civil liberties, but also makes it harder to combat transnational crime by pushing cross-border payments into unregulated channels.”
As of now, the bill remains in reconciliation, its fate undecided.
Helen Dempster of the Center for Global Development warned the new tax could result in a 5.6% decrease in remittance flows. While Mexico would suffer the highest absolute losses—more than $2.6 billion annually—countries like India, China, and Vietnam would also be hit hard. This would lead to diminished household income and a weakened demand environment in countries where remittances are a major part of the Gross National Income.
Dempster also noted that reductions in U.S. foreign aid could force migrants to increase remittances, further straining their finances. “For many low- and middle-income countries who rely on both aid and remittances, these two cuts coming from the administration are going to deal a double blow to the world’s poorest people,” she said.
In the U.S., the Latino community is also expressing deep concerns. Ana Valdez, President and CEO of The Latino Donor Collaborative, said, “Taxing the remittances won’t stop the money from leaving.” She cited testimonials such as, “my mom is gonna get her $1,000 every month, whatever it takes,” and “if I have to stop going to the movie theater, if I have to stop buying clothes, if I have to reduce my expenses in terms of other outings or hobbies, I will.”
Valdez highlighted that the Latino community wields a purchasing power of nearly $4 trillion. She warned that taxing their remittances would ripple through the broader economy. “People are sending money that has already been taxed,” she concluded. “This is a penalty on the American dream, because immigrants are the American dream.”
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