'Implications will be far lasting…': Financial advisor warns US's remittance tax plan could dent India’s economy

A new Republican tax proposal has sparked alarm among Non-Resident Indians (NRIs) in the United States. Introduced on May 12, 2025, the bill includes a contentious clause: a 5% tax on international money transfers made by non-citizens. For the millions of NRIs who routinely send funds to their families in India, this marks a sudden and sharp reversal in US tax policy.

This leaves NRIs with little room to manoeuvre. Whether using traditional banks or NRE/NRO accounts, the 5% fee applies across the board. Sending money home will now mean accepting a built-in cost.

Akshat Shrivastava, founder and CEO of The Wisdom Hatch Fund, has voiced strong concerns over the proposed US tax. He believes the 5% levy on outward remittances could deal a blow to NRIs investing in Indian assets and significantly dent India’s economy.

“It will get harder for NRIs to buy property & stocks in India,” Shrivastava posted on X (formally Twitter). “US is likely to apply 5% for remittances for NRIs. This means that NRIs sitting in US, if they send money abroad, will pay an additional 5% tax.”

He contrasted this with India’s existing 20% tax collected at source (TCS) for residents sending funds overseas, noting, “Point being: every country is trying to protect its outflow of capital.”

The implications, he warned, are far-reaching. “NRIs have been buying Indian assets quite aggressively (right from Real Estate to stocks)… US NRIs account for roughly 28% of all of our remittances. This is close to $32 billion. To put this in context: India’s education budget is $15 billion.”

Shrivastava cautioned that if these remittances slow, the ripple effects could be profound. “When an additional layer of tax is put, they are likely to send less money.”

Addressing the broader macroeconomic impact, he added, “This impacts our foreign reserves. NRIs have been helping India massively: it is easy to brush their contributions aside. But, if they have less incentive to invest due to such taxations, the implications will be far lasting.”

India, which receives an estimated $83 billion in remittances annually — much of it from the US — would feel the brunt. Under the new policy, ₹5,000 would be shaved off every ₹1 lakh sent back home. That deduction hits at the heart of day-to-day financial commitments, from family care and education to real estate investments.