Govt to assess US’ remittance tax impact on India

India will, in due course, assess the impact of the US’ proposed 3.5 per cent excise tax on outward remittances to gauge the potential dent in its overall remittances basket.

The Donald Trump-led administration has decided to implement the tax on funds sent abroad, a move effected this Thursday through amendments to the One Big, Beautiful Bill Act passed by the House of Representatives.

Though Trump had previously announced a 5 per cent excise tax on remittances sent abroad, the final draft of the Bill proposed a reduced figure of 3.5 per cent.

The move is expected to significantly impact India which receives on an average $25 billion from the US annually.

A top government source today said the Bill was bound to impact India. They added that so far an assessment of the impact has not been carried out.

“We have not yet made an assessment of the impact as to the extent to which this will cast a dent on remittances to India. We have not yet spoken about this. Once the Commerce Minister returns from the US we will look at this,” said a top official source.

Commerce Minister Piyush Goyal was on a visit to the US from May 17 to 22 to conduct negotiations for the first tranche of the proposed India-US Bilateral Trade Agreement.

Government sources said finer details of the Bill were being awaited.

Asked if there was even a ballpark figure to suggest the economic dent in the remittances basket, the source said “no”.

The proposed excise tax would apply only to non-US citizens and will impact green card holders and Indians on job visas.

The US proposal could severely interrupt the flow of foreign exchange back home as sending remittances to India becomes an expensive proposition.

According to US data, Indians were the second-largest foreign-born group in the country after Mexicans, comprising 6 per cent of the 47.8 million foreign-born population in the US as of 2023. More than 2.9 million Indians lived in the US as of 2003.

India