The Trump administration’s appetite for protectionist economic policies appears far from over. In a renewed effort, a proposed 5% tax on money transfers made by foreigners working in the United States to their home countries has sparked concern across global diaspora communities. For India, which relies heavily on remittance inflows from its migrant population in the U.S., this development could spell economic trouble.
A 389-page legislative proposal titled ‘The One Big Beautiful Bill’ has been introduced in the U.S. Congress. As per the bill, foreign nationals (non-U.S. citizens) sending money abroad will be required to pay a 5% tax on all remittances. This clause is specifically mentioned on page 327 of the draft and could become a financial burden for millions of immigrants, including a large number of Indian expatriates.
According to the Reserve Bank of India, India received $118.7 billion in remittances in FY 2023–24, with the United States accounting for 28%, or $32 billion. If this bill is passed in its current form, Indian migrants in the U.S. would collectively pay an estimated $1.6 billion annually in additional taxes.
As per the Ministry of External Affairs, around 4.5 million Indians currently reside in the U.S. Many of them hold H-1B and L-1 work visas or are green card holders awaiting citizenship. This proposed tax could significantly reduce the money they send home for family support or investments.
“Individuals who are not American citizens and are sending money outside the U.S. will be subjected to a 5% tax on all of their remittances.”
The proposed bill is a part of a fiscal consolidation package aimed at extending tax cuts from the Trump era and curbing federal expenditure. However, the 5% remittance tax directly targets foreign nationals and could create geopolitical and financial ripples globally.
The proposed 5% remittance tax by the U.S., outlined in the "One Big Beautiful Bill," presents a serious concern for millions of Indian migrants and India’s economy. With over 4.5 million Indians residing in the U.S., many of whom regularly send money back home to support families or invest in India, the financial impact could be substantial.
As per RBI data, $32 billion was remitted from the U.S. to India in FY 2023–24, accounting for 28% of total global remittances received by India. If implemented without exemptions, the tax could lead to an additional burden of $1.6 billion annually on Indian migrants.
This move not only risks straining Indo-U.S. economic relations but could also impact household finances, foreign exchange reserves, and consumption patterns in India. As the bill awaits legislative debate, both governments must weigh the long-term economic and diplomatic consequences of such a policy shift.