US May End Tax Exemption for OPT Students: Indian Aspirants Could Get Affected

by MalatiMajhi

Image source: The Economic Times300×225 5.7 KB

A new US bill, the DIGNITY Act of 2025, proposes ending a key tax break for international students on the Optional Practical Training (OPT) programme. If passed, this could significantly affect the finances of Indian students working in the US post-graduation.

What’s Changing?

Currently, OPT participants are exempt from FICA* taxes:

6.2% for Social Security

1.45% for Medicare

These exemptions save students and their employers a combined 15.3% in payroll taxes.

The proposed law would treat OPT students like regular US workers, making both students and employers pay FICA taxes. This could cost students hundreds to thousands of dollars annually (₹20,000 to ₹1.2+ lakh), depending on earnings.

Potential Impacts

Higher financial burden on OPT students

Reduced hiring incentives for employers

Drop in international student enrolments, especially in STEM fields

While the bill is still under debate in Congress, if passed, this rule could influence potential Indian students to decide against choosing the US as their top destination for studying abroad.

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Source: ET

*FICA (Federal Insurance Contributions Act) is a U.S. payroll tax that funds Social Security and Medicare programs. It’s a mandatory 15.3% tax split between employer and employee (6.2% for Social Security and 1.45% for Medicare each).