Thursday, 11 Sep, 2025
Photo courtesy: PixaBay
The bill, if passed, will hit Indians hardest by nearly doubling the cost of sending money from the US to India, pushing fees on $200 transfers from 4.3% to over 9%.
If you’re an Indian living in the US, sending money home may soon become significantly more expensive. And for India, that’s not just a personal concern — it’s an economic one.
A new provision in President Donald Trump’s legislative proposal, The One, Big, Beautiful Bill, includes a 5 per cent excise tax on all outward remittances from the US. The tax would apply to non-US citizens — including H-1B and F-1 visa holders, as well as green card holders — and would be charged at the time of transfer, regardless of the amount sent.
More significantly, the move could have a disproportionately large impact on India. The US is now the biggest source of India’s inward remittances, accounting for 27.7 per cent of all funds received in 2023–24, up from 22.9 per cent in 2016–17. These remittances are more than just private transfers — they play a significant role in supporting household incomes, improving living standards, and reducing current account deficit.
If the bill becomes law, the cost of sending money to India could rise sharply. For instance, sending $200 already costs about 4.32 per cent in transfer fees; adding a 5 per cent tax would push that to more than 9 per cent. For $500 transfers, the total cost would approach 8 per cent. These are steep increases, especially for middle-income workers and students.
The economic effects could ripple through New Delhi’s financial system. Lower remittance inflows may reduce household consumption in certain regions, affect savings patterns, and slow down local investment. For the Reserve Bank of India and policymakers, this adds a new layer of complexity to managing the balance of payments.
This proposal also highlights the growing dependence on a single remittance corridor. While the US diaspora remains a valuable source of foreign exchange, India may need to diversify inflow sources and strengthen domestic systems to absorb shocks caused by foreign policy changes.
Plus, this is not just a tax on money transfers — it is a potential constraint on an economic lifeline. India would do well to monitor the bill closely and prepare for a scenario where remittances are no longer as stable or affordable as they once were.
Several news reports mentioned that the proposed tax will be collected at the point of transfer by the remittance provider, such as a bank or money transfer service. However, there is a key exemption: the tax will not apply if the provider is a “qualified remittance transfer provider” and the sender is a verified US citizen. This distinction ensures that the levy primarily targets unverified or undocumented remittance transactions, rather than routine cross-border transfers by legitimate citizens.
If a US citizen is taxed, they may claim a refundable tax credit upon furnishing a valid Social Security number and requisite documentation.
A sharp fall in remittance inflows could tighten dollar liquidity in India’s forex market, putting mild depreciation pressure on the rupee. The Reserve Bank of India may need to step up intervention to stabilize the currency. Analysts warn a full remittance shock could push the rupee down ₹1 to ₹1.5 against the dollar. States like Kerala, Uttar Pradesh, and Bihar, heavily reliant on remittances for essentials like education and healthcare, stand to feel the strain most.
