US EditionTrump Tax on Remittances Could Hurt India, but Flows From Other Countries Might Limit Damage
- On May 12, 2025, a new bill was introduced in the U.S. House of Representatives proposing a 5% tax on remittances sent by non-U.S. Citizens—including visa holders and Green Card holders—to countries such as India.
- This proposal aims to generate revenue but worries Indian professionals in the US who rely on remittances, as it could reduce the flow of funds to Indian households.
- India received $118.7 billion in remittances in 2023-24, with the US contributing about $32.9 billion or 27.7%, while other countries like Singapore, Canada, and Australia have increased their shares recently.
- Experts warn that a 5% tax on remittances might reduce funds sent to India by 10-15%, potentially causing an annual shortfall between $12 billion and $18 billion, with losses estimated around $1.6 billion. This decline could also weaken the rupee by Rs 1 to 1.5 against the US dollar.
- Although such a tax might strain Indian household consumption and the foreign exchange market, rising remittances from other countries may partly offset the adverse effects on India.
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