Proposed US tax on remittances may cost India up to $18 billion: GTRI

A proposal by US President Donald Trump’s administration to impose tax on remittances could prove to be a major blow to India, with the country potentially losing $12-18 billion of foreign currency inflows each year, according to a report published on Sunday by Delhi-based think-tank Global Trade Research Initiative (GTRI).

Under its ‘The One Big Beautiful Bill’—introduced in the House of Representatives on 12 May—the Trump administration proposed the tax on remittances—non-commercial money transfers sent by immigrants and foreign workers to family members in their home countries.

The new rule would exempt US nationals, but non-citizens, including those on H-1B and H-2A visas, would be have to pay the tax.

Banks and money transfer services would be responsible for collecting the tax and remitting it to the US Treasury every three months.

According to GTRI, India received $120 billion in remittances in the financial year 2023–24, and the US accounting for nearly 28% of that total.

If implemented, the proposal could reduce remittance flows by 10–15%, which would be a loss of $12–18 billion annually.

“This reduction would shrink the supply of dollars in India’s foreign exchange market and could weaken the rupee by ₹1 to ₹1.5 per dollar,” the report noted.

The Reserve Bank of India would have to step in more frequently to stabilize the currency, it added.

States such as Kerala, Uttar Pradesh, and Bihar, where millions of families depend on remittances for essential expenses like education, healthcare, and housing, would be hit hardest, according to the report.

It further warned of a ripple effect across the economy, reducing household consumption and adding pressure at a time when India is already grappling with global economic headwinds and domestic inflation.

Other remittance-dependent countries such as El Salvador and Mexico are also expected to face challenges.

Mexican President Claudia Sheinbaum criticized the proposal as “unacceptable” and warned that it could amount to double taxation, since many migrant workers already pay taxes in the US.

According to GTRI, the move is a significant shift in US policy and could undermine a prime source of income for families in developing countries, eventually hampering global economic growth.