For millions of Indians living and working in the United States, sending money home is not a luxury—it's a lifeline. Whether it’s to pay for a younger sister’s school fees in Bihar, cover a parent’s medical expenses in Kerala, or help with rent back in Uttar Pradesh, remittances are a vital support system for families across India.
Now, a new proposal from former U.S. President Donald Trump threatens to upend this essential flow of support. Tucked into what Trump calls the “One Big Beautiful Bill” is a controversial clause: a 5% tax on all remittances sent by non-citizens from the United States.
A Heavy Burden on Immigrants
Unlike standard wire transfer fees, this is not a nominal charge. This tax would apply to every dollar sent home—with no exemption threshold. That means whether you're sending $100 or $10,000, 5% would go directly to the U.S. government.
Under this proposal, if an Indian worker in the U.S. sends ₹5 lakh (approximately $6,000) to their family in India, ₹25,000 (or $300) would be lost to taxation. Notably, this tax would not apply to U.S. citizens sending money abroad—creating an unequal system where non-citizens, regardless of their legal status, bear the brunt.
Who Will Be Affected?
The proposal disproportionately affects the over 4 million Indians residing in the United States—many of them students, H-1B professionals, and green card holders. These are individuals who contribute to the U.S. economy, pay taxes, and often work in high-skill, essential sectors.
And for India, the implications are staggering.
India: The World’s Top Remittance Receiver
In 2024, India received a record $129 billion in remittances—the highest in the world. Of this, a staggering $32 billion came from the U.S. alone, according to the Reserve Bank of India (RBI). If the 5% tax is enacted, nearly $1.6 billion of this amount would be lost annually—money that would otherwise go toward education, healthcare, and basic living expenses in India.
The RBI also reports that the U.S. share in India’s total remittance inflows has been steadily increasing—from 23.4% in FY21 to 27.7% in FY24. States like Kerala, Uttar Pradesh, and Bihar, which are heavily dependent on remittances from abroad, will be hit the hardest.
The Ripple Effects
The economic consequences don’t stop with families. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), warns that even a 10–15% drop in remittance inflows could lead to a $12–18 billion annual shortfall for India. The country’s foreign exchange reserves would feel the pressure, and the rupee could weaken by ₹1 to ₹1.5 per dollar.
