Key Points
- US remittance tax targets non-citizens, including temporary visa holders
- India got $119 remittances in 2023, mostly from US
- Remittance tax may cut India’s inflows by $18b annually: Experts
ISLAMABAD: A proposed 3.5 per cent tax on remittances sent abroad by foreign workers in the United States—part of Donald Trump’s sweeping “One, Big, Beautiful Bill Act”—has sparked serious concern among major remittance-recipient countries, particularly India.
The tax would apply to all non-citizens, including green card holders and temporary visa workers such as those on H-1B visas. Though some may be eligible for tax credits, the levy is expected to mostly affect undocumented migrants and those outside the formal tax system, according to BBC.
India, the world’s largest recipient of remittances, received $119 billion in 2023—over half of which originated from the US.
Experts said that taxing these transfers could lead to a 10–15 per cent drop in inflows, costing India up to $18 billion annually. This would place pressure on the rupee, shrink foreign reserves, and affect household budgets in states heavily reliant on remittances like Kerala, Uttar Pradesh, and Bihar.
Unregulated transfer channels
The proposal may also push migrants towards informal, unregulated transfer channels, including hawala, cryptocurrency, or carrying cash by hand, raising concerns about transparency and financial security, according to media reports.
Though the bill still awaits Senate approval and presidential sign-off, economists say its impact could be wide-ranging. According to a Washington-based think tank, Mexico could lose over $2.6 billion annually, with other countries like India, China, and the Philippines also affected.
While the tax is purportedly aimed at deterring unauthorised migration, migration experts argue it is unlikely to succeed. Migrants earning low wages in the US still earn several times more than they would at home and are unlikely to stop sending money to support their families.
Analysts said the policy could harm consumption, savings, and small-scale investment in countries like India, where remittances have been a vital source of financial stability.
