Why Trump's new tax will have Indian professionals in US worried

India Today

22-05-2025

A new bill by the Trump regime has got Indian professionals working in the US worried. The proposed legislation doesn't have to do with visa cancellation or deportation, but remittances. A bill introduced last week in the US suggests a 5% tax on remittances sent from the US to foreign countries by non-Americans. Experts suggest that it could impact Indian households.advertisementThe provision is included in a larger legislative package — The One Big Beautiful Bill — which was introduced in the US House of Representatives on May 12.The proposal targets international money transfers sent by non-US citizens, including Green Card holders and workers on temporary visas like H-1B or H-2A.
According to economic think tank Global Trade Research Initiative (GTRI), the proposed bill could negatively impact the rupee and Indian households.Some reports claim the proposed bill would affect nearly 40 million people living in the US.If the proposed bill is passed, for every hard-earned $100 sent to India by Indian professionals, $5 will have to be paid as tax. The individual will either send lesser amount home, or pay more to send the same amount of money to family in India.WHY TRUMP BILL HAS INDIAN PROFESSIONALS WORRIEDadvertisementA Republican-backed proposal to tax remittances could have a severe economic impact on some of the US's poorest neighbouring countries, including key allies of the US.According to World Bank data from 2024, India is the top recipient of international remittances, with $129 billion coming from abroad, followed by Mexico with more than $68 billion. Twenty-eight percent of all remittances to India originated from the US in 2023-24.India accounted for 14.3% of global remittances during this period, the highest share recorded by any country since the start of the millennium.According to the GTRI, if the bill is passed, India would lose billions in annual foreign currency."The proposed US 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 GTRI said in a report."A 5% tax could significantly raise the cost of sending money home. A 10–15 per cent drop in remittance flows could result in a USD 12–18 billion shortfall for India annually," news agency PTI quoted GTRI founder Ajay Srivastava as saying.He noted that the loss would reduce the availability of US dollars in India's foreign exchange market, exerting mild downward pressure on the rupee.advertisement"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 US dollar if the remittance shock plays out fully," he added.Indian professionals in the US and those even on Green Cards would be worried over this remittance tax."The One, Big, Beautiful Bill proposes a 5% excise tax on remittance by non citizens. This will impact all Indians on long-term visas and Green Card in the US sending money home. Impacts H-1B workers also. Billions of dollars were remitted last year," Bengaluru-based tax lawyer Ajay Rotti.REMMITANCES ARE A LIFELINE FOR MANY HOUSEHOLDSIn states such as Kerala, Uttar Pradesh, and Bihar, remittances serve as a financial lifeline for millions of families, helping them meet basic needs like education, healthcare, and housing.Srivastava further said that 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.He warned that taxing international capital flows could undermine a vital source of global development funding, lower household incomes in poorer countries, and dampen demand in economies already facing inequality and instability.advertisementThe development assumes significance, as India has proposed at the World Trade Organisation (WTO) to lower the cost of cross-border flow of capital or remittances."The 5% tax could cost India approximately $1.6 billion annually," said chartered accountant Shree Ram Raut, going by the numbers that 45 lakh Indians in the US sent back $32 billion in 2023-24.The bill has already received some criticism.Mexican President Claudia Sheinbaum, last Thursday, spoke about the tax bill directly, calling the proposal "a measure that is unacceptable".She added that her government was reaching out to other countries with large immigrant populations to voice concern about the US proposition.MAGA ON SOCIAL MEDIA: 'MORE TAXES, SELF-DEPORT'The pro-Trumpers and the MAGA-heads (Make America Great Again) took to social media to ask for more remittances, which would in turn make "immigrants self-deport"."5% tax on remittances is too low. Migrants won't even feel it. Make it 50% & many may self-deport," shared a person on X.Others also shared similar sentiments."A 5% remittance tax is a complete *****, the conversation should start at 100% and we can go from there," wrote another person.Some even called it "poor policy".advertisement"Trump's 5% remittance tax is poor policy. Remittances are post-income-tax transfers, vital to global consumption. Taxing them again distorts flows, burdens workers, and risks driving funds to informal channels. It's double taxation with negative externalities," shared another person."Placing a 50% or 100% tax--not 5%-- on remittances will provide the US a major tool to combat illegal immigration. Practically all illegals send money back to their home countries," another person wrote.Then, there were others who called it "wall tax"."5% Remittance Tax to pay for all deportations and the wall. We tax everything, this is our country, get the tax in place!!!," a person wrote on X.The proposed 5% tax on remittances and the MAGA faithful seeking higher tax rates will obviously get Indian professionals working in the US and sending money back home worried.