New US Tax on Remittances Could Strain Indian Families and NRI Housing Market
By Sanjana B
Updated: May 19, 2025 | 08:48 AM
A proposed 5 per cent US tax on outbound remittances threatens to significantly cut the money sent home by non-US citizens of Indian origin, especially H-1B visa holders and green card residents. This move has raised alarm over its potential to strain household budgets, dampen NRI-backed real estate investments, and slow other remittance-driven sectors.
“A reading of the particular section of the proposed ‘One Big Beautiful Bill’ suggests the exception is only given to ‘verified US citizens or US nationals,’” observed Karanjot Singh Khurana, Partner at Lakshmikumaran and Sridharan Attorneys.
Other Challenges
Varun Singh, MD of XIPHIAS Immigration, explained:
“This tax could affect Indian households depending on remittances for their daily needs, education, healthcare and investments. For every ₹1 lakh sent from the US, ₹5,000 would be diverted to the IRS, reducing the amount received by families in India. This could strain household budgets, delay educational pursuits, and hinder healthcare access. Moreover, it may compel senders to explore informal channels, potentially exposing them to fraud and legal complications.”
In 2023, globally, $656 billion was sent to low- and middle-income countries, with the US contributing significantly. Remittances sent by overseas Indians amounted to $120 billion, with a substantial portion originating from the US.
Other major remittance-sending countries include Saudi Arabia, Switzerland, Germany, and the UAE.
Key Market
A Reserve Bank of India (RBI) survey shows that the US accounted for 27.7% of all remittances to India in 2023–24, followed by the UAE at 19.2%.
“This policy can also reduce the trust and use of official remittance channels, encouraging non-citizens to use informal, unregulated, and perhaps riskier avenues to bypass that 5 per cent tax,” said Mamta Shekhawat, Founder of Gradding.com, a study abroad platform.
The proposed timeline to pass the Bill, possibly in May with enactment by early July 2025, puts pressure on 5 million overseas Indians in the US, including H-1B, L-1 visa holders, and green card residents who send money home regularly.
To Hit Realty Market
In parallel, the Bill’s passage could distort India’s real estate market by reducing NRI-driven housing demand, impacting developers heavily reliant on such buyers.
Anarock’s Annual Residential Report 2024 revealed:
- 59% of new housing projects in Delhi NCR
- 18% in Hyderabad
- 12% in MMR (Mumbai Metropolitan Region)
were priced above ₹2.5 crore, reflecting strong demand from wealthy buyers and NRIs, with the latter playing a key role.
“Such developers would orient more toward domestic buyers and perhaps lobby for policy interventions in India to provide relief. That said, the impact would not be huge, as domestic demand remains robust across the mid-range, premium and luxury segments. From past learnings, we will need to wait and watch to see if this or similar proposed moves by the US materialise,” commented Prashant Thakur, Regional Director & Head - Research, ANAROCK Group.
Comparison with Indian Tax Laws
Khurana noted that the provision mirrors the Tax Collected at Source (TCS) mechanism under Indian tax laws, where a percentage is deducted from the remitter and credited to the government.
“However, a key difference in the proposed US tax is that tax credit is available only to those with valid social security numbers. The onus will be on the remittance organisation to verify the sender as a US citizen or US national,” he said.
(With inputs from Sindhu Hariharan and Aishwarya Kumar)
