In US President Donald Trump's "One Big Beautiful Bill," recently pushed through the House of Representatives, lies a provision that could change global remittance flows, and India, the world's leading recipient of remittances, could be impacted the most.
On May 22, the US House narrowly passed the bill by a 215-214 margin, moving forward legislation that includes a proposed 3.5 per cent tax on all outbound remittance transfers. Originally pitched at 5 per cent, the rate was later revised under pressure. The clause targets funds transferred from the United States to recipients abroad by foreign workers, including legal residents such as green card holders and temporary visa workers like H-1B employees.
The proposed bill has been heavily criticised by billionaire Elon Musk, who has had a monumental fallout with the US President. "I think a bill can be big or it could be beautiful. But I don't know if it could be both," the Tesla and SpaceX chief said recently.
How It Will Impact India
According to the World Bank and Reserve Bank of India (RBI), India received approximately $129 billion in remittances in 2024 alone. The figure is almost as much as the annual budgets of Pakistan ($67 billion) and Bangladesh ($68 billion) combined. The largest portion of this sum originates from Indian workers in the United States.
The proposed new tax could drain billions from the pool of funds that support millions of households in India.
In the last 10 years, India's overall remittances grew by 57 per cent. In total, between 2014 and 2024, India has received nearly $1 trillion dollars ($982 billion) only in remittances.
The tax could disproportionately affect states where remittance flows are critical to household consumption. Kerala, Maharashtra, Uttar Pradesh, and Bihar are among the top recipients.
Migrant Labour Impact
India's international migrant population rose from 6.6 million in 1990 to an estimated 18.5 million by 2024. While the Gulf continues to host a larger portion of these migrants, a significant share now resides in developed economies, particularly the United States, where Indian professionals dominate high-earning sectors like IT, healthcare, finance, and engineering.
Recent figures show that nearly 78 per cent of Indian workers in the US are employed in high-income professions, contributing to a sharp increase in total remittances from the US, which accounted for almost 28 per cent of India's total in 2023-24, up from 23.4 per cent in 2020-21.
"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 Global Trade Research Initiative (GTRI) said, as quoted by news agency PTI.
Political Context Of The Bill
The remittance tax is just one element of the sweeping legislation backed by President Trump, who has promised that the bill will fund his campaign pledges
Some other provisions include:
No federal tax on tips and overtime for individuals earning under $160,000 per year, a measure Trump heavily promoted during his 2024 campaign.
Creation of Trump Savings Accounts with a $1,000 initial deposit for newborns and a $5,000 annual contribution cap.
Repeal of excise taxes on gun silencers and indoor tanning services.
SALT deduction cap raised from $10,000 to $40,000 for joint filers with income under $500,000 - though this provision faces opposition in the Senate;
A rollback of green energy tax credits, including those for electric vehicles and residential solar panel installations.
Deep cuts to student loan programs.
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