US remittance tax plan could impact Indian households, rupee: GTRI
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New Delhi: A proposed 5 per cent US tax on remittances sent abroad by non-citizens is raising alarm in India, as it may hit Indian households and the rupee, economic think tank GTRI said on Sunday.
The provision is part of a broader legislative package titled 'The One Big Beautiful Bill' introduced in the US House of Representatives on May 12.
It targets international money transfers made by non-US citizens, including green card holders and temporary visa workers like those on H-1B or H-2A visas. The proposed levy will not be applicable to US citizens.
"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.
For India, the stakes are high, as the country received USD 120 billion in remittances in 2023-24, with nearly 28 per cent originating from the US, it added.
"A 5 per cent tax could significantly raise the cost of sending money home. A 10-15 per cent drop in remittance flows could result in a USD 12-18 billion shortfall for India annually," GTRI founder Ajay Srivastava said.
He said that the loss would tighten the supply of US dollars in India's foreign exchange market, putting modest depreciation pressure on the rupee.
"The Reserve Bank of India may be forced to intervene more frequently to stabilise the currency. The rupee could weaken by Rs 1-1.5 per US dollar if the remittance shock plays out fully," he added.
In states like Kerala, Uttar Pradesh, and Bihar, millions of families rely on remittances to cover essential expenses like education, healthcare, and housing.
Srivastava warned that a sudden drop in remittance flows could severely impact household consumption, especially as the Indian economy continues to navigate global uncertainty and inflationary pressures.
He emphasised that by imposing a tax on global capital flows, the US could disrupt a crucial channel of global development financing, diminish household incomes in poorer nations, and weaken demand in economies already struggling with inequality and instability.
This development gains significance as India has put forward a proposal at the World Trade Organisation (WTO) aimed at reducing the cost of cross-border capital transfers and remittances.
(inputs from PTI)