US Remittance Tax : A new tax proposal in the United States, officially called “The One Big Beautiful Bill” by former President Donald Trump, includes a 5% remittance tax on non-citizens. If passed, this law will impact lakhs of Indians living in the US—especially H-1B visa holders, green card holders, and other non-citizens. The bill could make sending money back to India more expensive and affect the flow of remittances.
India: The World’s Largest Recipient of Remittances
India has held the position of the world’s top remittance recipient since 2008. In 2023, it received $120 billion in remittances. This was significantly higher than other major recipients like Mexico ($66 billion), China ($50 billion), the Philippines ($39 billion), and Pakistan ($27 billion), according to the Migration Data Portal. Remittances are a key financial support system for millions of families in India and an important contributor to the country’s economy.
Impact of the US Bill on India
The United States is the largest source of remittances to India. As per the Reserve Bank of India’s survey (March 2025), $32 billion, or 28% of the total $118.7 billion received by India in 2023–24, came from the US.
According to the Indian Ministry of External Affairs, there are around 45 lakh overseas Indians living in the US, including 32 lakh Persons of Indian Origin (PIOs). If the new US remittance tax is enforced, the Indian diaspora could end up paying approximately $1.6 billion in extra taxes. While this estimate assumes remittance levels stay constant, the additional cost could discourage transfers and potentially reduce future inflows.
State-wise Impact of Remittances
While the RBI tracks state-wise remittance data, it does not provide a breakdown by source country (such as remittances from the US to individual Indian states). However, certain states consistently receive the highest shares of India’s total remittances. These include Maharashtra, Kerala, Tamil Nadu, Telangana, and Karnataka, which together account for about two-thirds of total inflows. This means that any major change in remittance flow from the US would most directly impact families and economies in these states.
Growth of Remittances
India’s remittance inflows have grown significantly over the past decade. In 2010–11, India received $55.6 billion. This more than doubled by 2023–24, reaching $118.7 billion, according to the Reserve Bank of India. There was a brief slowdown during the COVID-19 pandemic. In 2020–21, remittances dropped by 3.6%. However, the post-pandemic period saw a strong recovery. Between 2021–22 and 2023–24, remittances to India grew at an average annual rate of 14.3%.
Why Remittances Matter
Remittances are a critical pillar of India’s external finances. They help fund a significant portion—nearly half—of India’s merchandise trade deficit, which occurs when the country imports more than it exports. In 2023–24, the $118.7 billion in remittance inflows helped reduce pressure on India’s current account.
What makes remittances even more valuable is their stability compared to Foreign Direct Investment (FDI). FDI is more sensitive to market and geopolitical changes, while remittances have remained consistent—even during global shocks like the pandemic. In fact, for many years, India’s remittance inflows have exceeded FDI. As a result, remittances not only support individual households but also act as a shock absorber for the economy, ensuring greater financial resilience during times of global crisis.