U.S. remittance tax plan may hit Indian households, rupee: GTRI

The provision is a part of a broader legislative package deal titled ‘The One Big Beautiful Bill’ launched within the U.S. House of Representatives. File
| Photo Credit: Reuters

A proposed 5% U.S. tax on remittances despatched overseas by non-citizens is elevating alarm in India because it may hit Indian households and the rupee, financial assume tank GTRI mentioned on Sunday (May 18, 2025).

The provision is a part of a broader legislative package deal titled ‘The One Big Beautiful Bill’ launched within the U.S. House of Representatives on May 12.

It targets worldwide cash transfers made by non-U.S. residents, together with inexperienced card holders and short-term visa employees like these on H-1B or H-2A visas. The proposed levy won’t be relevant to US residents.

“The proposed U.S. tax on remittances sent abroad by non-citizens is raising alarm in India, which stands to lose billions in annual foreign currency inflows if the plan becomes law,” the Global Trade Research Initiative (GTRI) mentioned.

For India, the stakes are excessive because the nation obtained $120 billion in remittances in 2023-24, with almost 28% originating from the U.S., it added.

“A 5% tax could significantly raise the cost of sending money home. A 10-15% drop in remittance flows could result in a $12-18 billion shortfall for India annually,” GTRI founder Ajay Srivastava mentioned.

He mentioned that the loss would tighten the provision of U.S. {dollars} in India’s international trade market, placing modest depreciation strain on the rupee.

“The Reserve Bank of India may be forced to intervene more frequently to stabilise the currency. The rupee could weaken by RS 1-1.5 per U.S. dollar if the remittance shock plays out fully,” he added.

In States like Kerala, Uttar Pradesh, and Bihar, thousands and thousands of households depend on remittances to cowl important bills like schooling, healthcare, and housing.

Mr. Srivastava mentioned {that a} sudden decline in these flows may hit family consumption arduous, at a time when the Indian economic system is already navigating international uncertainty and inflation pressures.

By taxing the worldwide capital movement, he mentioned, the US may disrupt a key channel of world growth financing, cut back family earnings in poorer nations, and weaken demand in economies already grappling with inequality and instability.

The growth assumes significance, as India has proposed on the World Trade Organization (WTO) to decrease the price of cross-border movement of capital or remittances.