A new proposal by US President Donald Trump to impose a 5% tax on money transfers made by non-citizens has raised concerns globally, especially in India. The Global Trade Research Initiative (GTRI), a trade research group, highlighted in its latest report that this move could have serious consequences for Indian households.
India Faces Major Risks from US Remittance Tax
According to GTRI, this proposed tax would increase the cost of sending money home for millions of Indians living and working in the US. The legislation, introduced in the US House of Representatives on May 12 under the title “The One Big Beautiful Bill”, aims to impose a 5% fee on all international money transfers made by non-US citizens.
This includes individuals with green cards or temporary work visas like H-1B and H-2A. However, American citizens are excluded from this tax. The funds would be collected by banks and remittance service providers and sent to the US Treasury every quarter.
India Receives the Highest Share of US Remittances
The report emphasized that India is particularly vulnerable. In the financial year 2023-24, India received $120 billion in remittances, and nearly 28% of that amount came from the US alone. GTRI, led by its founder and former Indian trade official Ajay Srivastava, warned that a 5% tax could significantly increase costs for those sending money back home.
It stated, “The pain wouldn’t stop at the exchange rate. In states like Kerala, Uttar Pradesh, and Bihar, millions of families rely on remittances to cover essential expenses such as education, healthcare, and housing. A sudden decline in these flows could hit household consumption hard–at a time when the Indian economy is already navigating global uncertainty and inflation pressures.”
A Drop in Remittances Could Hurt the Rupee
GTRI estimates that if remittances fall by 10–15% due to this tax, India could lose between $12 billion and $18 billion annually. This shortfall could lead to a tighter supply of US dollars in India’s foreign exchange reserves and put pressure on the Indian rupee.
The report also warns that the Reserve Bank of India (RBI) may need to step in more often to prevent the currency from falling further. If the situation worsens, the rupee could depreciate by ₹1 to ₹1.5 against the US dollar.
Other Countries Also at Risk
India is not the only country that could be affected. The GTRI report pointed out that nations such as El Salvador and Mexico also face similar risks. Remittances account for over 25% of El Salvador’s GDP and about 4% of Mexico’s. A tax on remittances could seriously hurt their economies too.
In summary, GTRI warns that the proposed tax would not only raise costs for workers abroad but could also affect families, the economy, and the strength of India’s currency back home.
