Bad news for NRIs, Indian students in US as Trump brings new law that will affect India due to...
The US Senate passed President Donald Trump's "One Big beautiful Bill Act" on Tuesday, which, among other things, imposes a new tax on foreign money transfers by non-US citizens. This is a significant development that could have a negative impact on indian students and Non-Resident indians (NRIs) in the US.
What is the new trump remittance tax?
Starting July 4, 2025, remittances sent with cash, money orders, or cashier's checks will be subject to a one percent tax under the new tax law, which many have dubbed the trump remittance tax. Any remittances made by non-US citizens, including international students, Green Card holders, and those on temporary visas like H-1B or H-2A, are subject to the tax.
H-1B employees and indian students will now have to pay more to send money home as a result of the remittance tax. For instance, a person will now be required to pay an additional Rs 1,000 in taxes if they send approximately Rs 100,000 ($1,160) back to India. The remittance provider, such as Western Union, MoneyGram, or any bank, will collect the funds and send them to the US government on a quarterly basis.
The tax rate was originally planned at 5%, but in the final draft, it was lowered to 1%, which was a huge relief.
How much remittance does india receive?
One of the main sources of India's foreign exchange reserves is foreign remittances; the World bank estimates that the nation received $129 billion in overseas remittances in 2024, the most in the world. The united states accounted for over 28% of India's remittance inflows in 2023–2024.
Data suggests that Trump's new tax plan may disproportionately affect states like Uttar Pradesh, Bihar, and Kerala, where millions of families rely heavily on offshore remittances.
In these states, millions of households rely on remittances to cover costs such as housing, healthcare, and education. However, a sharp drop in remittances could significantly reduce their purchasing power and increase the strain on the indian economy, which is already dealing with issues like inflation and global uncertainty, according to economists.
Why could US remittances impact India's forex reserves?
Economists believe that the new remittance tax, which imposes a 1 percent fee on indians living in the united states, might have a significant effect on India's foreign exchange reserves (forex).
Senior economist ajay Srivastava had previously predicted that a 10-15% decline in remittances from the US may cost india $12-18 billion.
In a recent interview, Srivastava said that fewer remittances translate into less US dollar influx into India's foreign exchange market, which would have a detrimental effect on the indian Rupee and necessitate frequent bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW">reserve bank of india (RBI) interventions to stabilize the currency. In response to fewer remittances, he forecasted that the rupee may drop by roughly Rs 1.5 versus the US dollar.
What is the new trump remittance tax?
Starting July 4, 2025, remittances sent with cash, money orders, or cashier's checks will be subject to a one percent tax under the new tax law, which many have dubbed the trump remittance tax. Any remittances made by non-US citizens, including international students, Green Card holders, and those on temporary visas like H-1B or H-2A, are subject to the tax.
H-1B employees and indian students will now have to pay more to send money home as a result of the remittance tax. For instance, a person will now be required to pay an additional Rs 1,000 in taxes if they send approximately Rs 100,000 ($1,160) back to India. The remittance provider, such as Western Union, MoneyGram, or any bank, will collect the funds and send them to the US government on a quarterly basis.
The tax rate was originally planned at 5%, but in the final draft, it was lowered to 1%, which was a huge relief.
How much remittance does india receive?
One of the main sources of India's foreign exchange reserves is foreign remittances; the World bank estimates that the nation received $129 billion in overseas remittances in 2024, the most in the world. The united states accounted for over 28% of India's remittance inflows in 2023–2024.
Data suggests that Trump's new tax plan may disproportionately affect states like Uttar Pradesh, Bihar, and Kerala, where millions of families rely heavily on offshore remittances.
In these states, millions of households rely on remittances to cover costs such as housing, healthcare, and education. However, a sharp drop in remittances could significantly reduce their purchasing power and increase the strain on the indian economy, which is already dealing with issues like inflation and global uncertainty, according to economists.
Why could US remittances impact India's forex reserves?
Economists believe that the new remittance tax, which imposes a 1 percent fee on indians living in the united states, might have a significant effect on India's foreign exchange reserves (forex).
Senior economist ajay Srivastava had previously predicted that a 10-15% decline in remittances from the US may cost india $12-18 billion.
In a recent interview, Srivastava said that fewer remittances translate into less US dollar influx into India's foreign exchange market, which would have a detrimental effect on the indian Rupee and necessitate frequent bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW">reserve bank of india (RBI) interventions to stabilize the currency. In response to fewer remittances, he forecasted that the rupee may drop by roughly Rs 1.5 versus the US dollar.