A proposed 5 percent tax on outward remittances by the Trump administration is set to significantly impact Indian expatriates in the United States. According to recent Reserve Bank of India (RBI) data, this levy could result in an annual financial burden exceeding USD 1.6 billion. This tax would apply to individuals holding green cards and H1B visas but excludes US citizens. The shift in global remittance patterns highlights a growing trend where advanced economies such as the US, UK, Singapore, Canada, and Australia now dominate India's inbound remittance landscape, overshadowing contributions from Gulf countries.

In the past decade, India has experienced a remarkable surge in remittances, doubling from USD 55.6 billion in 2010-11 to USD 118.7 billion in 2023-24. Data indicates that the US alone accounts for nearly 27.7 percent of these funds, translating to approximately USD 32.9 billion. A 5 percent tax on this amount equates to roughly USD 1.64 billion annually. Experts emphasize that the cost associated with cross-border money transfers not only includes transaction fees but also involves exchange rate conversions, which collectively have socio-economic implications for families reliant on these funds.

This development aligns with broader global trends, as India continues to lead the world in remittance inflows since 2008. In 2024, India topped the list with an estimated USD 129 billion inflow, followed by Mexico, China, the Philippines, and Pakistan. Authors from RBI’s Department of Economic and Policy Research underscore the importance of reducing remittance costs, a policy objective globally recognized for over a decade.

The potential introduction of this tax raises concerns about its impact on both individual households and the overall economic dynamics between the two nations. As discussions around the proposal continue, stakeholders anticipate further analysis and dialogue regarding its long-term effects on financial flows and family welfare across borders.