New US policy threatens to siphon off critical funds sent home by Indian migrants, impacting families and the national economy.
Washington D.C. – A hidden provision in US President Donald Trump’s proposed ‘One Big Beautiful Bill’ could cost India billions of dollars annually by imposing a 3.5 percent tax on remittances sent by foreign workers, including green card holders and H-1B visa employees, to their home countries. India, the world’s top recipient of remittances, stands to lose significantly if the policy is enacted.
India’s Remittance Powerhouse
In 2023, Indian migrants sent $119 billion home, accounting for 15 percent of global remittances, according to the World Bank. This figure, projected to reach $160 billion by 2029 per the Reserve Bank of India (RBI), covers half of India’s goods trade deficit and surpasses foreign direct investment (FDI). The United States, contributing 28 percent of India’s remittances in 2023-24, is the largest source, driven by skilled workers in sectors like IT, management, and science. The proposed tax could reduce these inflows, hitting household budgets for essentials like healthcare, education, and loan repayments.
Global Impact and Policy Concerns
India is not alone. Countries like Mexico, China, the Philippines, France, Pakistan, and Bangladesh also rely heavily on remittances. Globally, remittances reached $860 billion in 2023, with India leading since 2008. The tax could disrupt these flows, raising concerns about increased costs for migrant families. A 2024 UN report highlighted that remittance costs already exceed the global target of 3 percent, though India benefits from relatively low transfer fees due to digital platforms and market competition.
Expert Insights and Loopholes
Dilip Rath, the World Bank’s lead economist on migration, told the BBC that the tax would apply to non-citizens, including international organization employees, but tax credits could offset the burden for legal migrants. However, undocumented migrants, who often avoid taxes, may face the full impact. Rath noted on LinkedIn that migrants might turn to informal channels like cash couriers, hawala, or cryptocurrencies to bypass the tax, potentially fueling unregulated financial systems. A 2025 study by the International Monetary Fund (IMF) warned that such taxes could shrink remittance flows by 5-10 percent, disproportionately affecting developing economies.
India’s Migrant Surge
India’s migrant population grew from 6.6 million in 1990 to 18.5 million in 2024, with a global share of over 6 percent. While Gulf countries host nearly half of these migrants, the US has seen a surge in skilled labor, particularly in tech. The US economy’s post-pandemic recovery and a 6.3 percent rise in foreign workers in 2022 have bolstered remittance flows. However, the proposed tax could deter legal migration and strain India’s economic stability, where remittances contribute 3 percent to GDP.
Uncertain Future
The tax proposal awaits Senate approval and the President’s signature, creating uncertainty. Critics argue it could harm US-India economic ties, given India’s role as a key trade partner. “This tax risks alienating skilled workers who drive innovation in the US while supporting families abroad,” said Priya Sharma, an economist at the Center for Global Development. Others fear it may push remittances underground, complicating global financial oversight.