Concerns are growing in India over the proposal to impose a five percent tax on remittances sent abroad by non-citizens in the US . Economic research institute Global Trade Research Initiative (GTRI) said on Sunday that this could harm Indian families and the rupee. According to an estimate, this tax could cost Indians living in the US more than US $ 1.6 billion annually. This provision is part of a comprehensive legislative package called ‘The One Big Beautiful Bill’ introduced in the US House of Representatives on May 12.
These people will be affected
This will affect more than 40 million people, including those holding green cards and H1B visas. The proposed fee will not apply to US citizens. “The proposal to tax remittances by non-citizens in the US is raising concerns in India because if the plan becomes law, India will lose billions of dollars in foreign exchange inflows annually,” GTRI said. “A five percent tax could significantly increase the cost of remittances. If remittances fall by 10-15 percent annually, India will lose $12-18 billion,” GTRI founder Ajay Srivastava said.
There will be pressure on the rupee
He said that this loss will reduce the supply of US dollars in India’s foreign exchange market, which will put downward pressure on the rupee. Srivastava said, “The Reserve Bank of India may have to intervene more often to stabilize the currency. Due to this, the rupee may weaken by Rs 1-1.5 per US dollar.”
How much impact will it have
According to an article published in the March Bulletin of the Reserve Bank of India (RBI), India received a total of $32.9 billion in remittances from the US in 2023-24. Five percent of this would be $1.64 billion. The RBI article said that the amount received from remittances is mainly used for the maintenance of the family, so the increase in its cost has a socio-economic impact. Reducing this cost has been an important policy agenda globally.
