India’s position as the world’s top remittance recipient could face a setback if U.S. President Donald Trump’s proposed economic legislation passes with a clause imposing a 3.5% tax on money sent abroad by foreign workers.
The proposed tax is part of the “One, Big, Beautiful Bill Act” and would apply to remittances made by non-citizens, including green card holders and temporary visa holders such as H-1B workers. Analysts say this could significantly impact India, which received a record $129 billion in remittances in 2024, with the United States contributing the largest share.
India has been the top recipient of global remittances since 2008. According to the World Bank, its share rose from 11% in 2001 to 14% in 2024. The Reserve Bank of India expects remittances to reach $160 billion by 2029.
In 2023 alone, Indians abroad sent home $119 billion, enough to finance nearly half of India’s goods trade deficit and exceeding the nation’s foreign direct investment inflows.
According to the World Bank, the United States remains the largest source of remittance outflows, accounting for 28% of global transfers in 2023–24. A strong post-pandemic labor market and a 6.3% rise in foreign-born workers have supported this trend.
A levy on remittances could reduce formal flows by 10–15%, resulting in a potential loss of $12–18 billion annually, said Ajay Srivastava of the Global Trade Research Initiative. The decline could pressure India’s rupee and reduce household consumption in remittance-dependent regions such as Kerala, Uttar Pradesh, and Bihar.
The proposed tax would apply to remittances sent through formal channels by non-citizens who do not file U.S. taxes. Those who do file taxes may be eligible for a credit, according to World Bank lead economist Dilip Ratha.
Critics warn the measure could drive migrants to use informal transfer methods such as hawala, cash couriers, or cryptocurrency, increasing the risk of unregulated financial flows.
Ratha said migrants are unlikely to stop sending money. “Even a 3.5% tax will not deter them. Migrants cross oceans and borders to support families back home,” he said.
Indian migrants in the U.S. are among the highest-earning diaspora communities, with 78% working in high-income sectors such as business, science, and technology. Most send between $1,800 and $48,000 annually, according to migration experts.
The remittance tax is still under legislative review and awaits Senate approval. If passed, it may also impact other top remittance-receiving nations such as Mexico, the Philippines, China, Pakistan, and Bangladesh.
A study by the Center for Global Development estimates that Mexico could lose over $2.6 billion per year from reduced formal remittances. India, China, and several Latin American countries may also face significant declines.
The Indian government has not yet issued an official response to the proposed measure.
