A recently proposed piece of legislation in the United States, informally dubbed 'The One Big Beautiful Bill,' introduces a significant financial consideration for non-US citizens, particularly affecting the Indian diaspora. This bill aims to impose a 5% tax on remittances sent abroad by individuals who are not US citizens, including those holding H-1B visas and green cards. This potential tax could drastically alter how the millions of Indians in the US support their families back home, a practice that has profound economic implications for both the senders and the recipients.

Currently, the Indian diaspora in the United States is a substantial contributor to the nation's economy, with estimates indicating that they send approximately $32 billion annually in remittances to India. This amount represents a significant portion of the total remittances received by India, which the Reserve Bank of India (RBI) projects to be around $118.7 billion for the fiscal year 2023-24. With the US emerging as the largest source of remittances for India, this upcoming tax could bear heavy financial consequences.

The bill's provisions are outlined in a rather lengthy document, specifically on page 327 of a 389-page tax plan recently released by the US House Ways and Means Committee. It states that the 5% tax will be applied to the total amount sent, with no exemption threshold established. This means even small transfers, which are often lifelines for many families, will not be spared from this financial burden. The proposed tax does, however, exclude remittances made through a 'qualified remittance transfer provider' if the sender is identified as a 'verified US sender,' yet this definition restricts eligibility predominantly to US citizens.

For instance, if an H-1B worker or a green card holder wishes to send money to family members in India, perhaps to support aging parents or to invest in property, the financial institution facilitating the transfer would be required to withhold 5% of the remitted amount. This could translate to a tax liability of around $1.6 billion from the Indian diaspora alone if the bill proceeds as intended.

Looking ahead, the House of Representatives is pushing to pass 'The One Big Beautiful Bill' by May. Should it pass, the next step would involve a review and potential approval by the Senate. Experts in cross-border investment have expressed that the bill is likely to gain traction and could become law by mid-summer, prompting advisories for members of the Indian diaspora to consider remitting larger amounts in the near term to mitigate the impact of this impending tax.