Elon Musk, a billionaire with a significant rift with the US president, has been a harsh critic of the proposed plan.
A clause in US President Donald Trump’s “One Big Beautiful Bill,” which was just passed by the House of Representatives, has the potential to alter global remittance flows, with India—the world’s largest beneficiary of remittances—being the most affected.
By a slim vote of 215-214, the US House passed the measure on May 22nd, advancing legislation that would impose a 3.5% tax on all outgoing remittance payments. Under pressure, the rate was changed from its initial pitch of 5%. The section targets foreign workers, including those with temporary visas like H-1B employees and legal residents like green card holders, who transfer money from the United States to receivers overseas.
Elon Musk, a billionaire with a significant rift with the US president, has been a harsh critic of the proposed plan. “I believe that a bill can be large or exquisite. However, the CEO of SpaceX and Tesla recently stated, “I’m not sure if it could be both.”
How India Will Be Affected
The Reserve Bank of India (RBI) and the World Bank estimate that remittances to India totaled about $129 billion in 2024 alone. The amount is nearly equal to the combined yearly budgets of Bangladesh ($68 billion) and Pakistan ($67 billion). The vast majority of this amount comes from Indian laborers in the US.
The money that supports millions of Indian households could be depleted by billions as a result of the proposed new tax.
India’s total remittances increased by 57% over the past ten years. India has received around $1 trillion ($982 billion) in remittances alone between 2014 and 2024.
States that depend heavily on remittance flows for household consumption may be disproportionately impacted by the tax. Among the major beneficiaries are Bihar, Uttar Pradesh, Kerala, and Maharashtra.
Impact of Migrant Labor
By 2024, there will likely be 18.5 million foreign migrants living in India, up from 6.6 million in 1990. Although the majority of these migrants still live in the Gulf, a sizable portion now dwell in developed nations, especially the US, where Indian professionals predominate in high-paying industries including engineering, IT, healthcare, and finance.
Nearly 78% of Indian workers in the US work in high-paying occupations, according to recent data, which has led to a dramatic rise in US remittances, which made up nearly 28% of India’s total in 2023–24, up from 23.4% in 2020–21.
According to the Global Trade Research Initiative (GTRI), which was cited by news agency PTI, “India is alarmed by the proposed US tax on remittances sent overseas by non-citizens, which stands to lose billions in annual foreign currency inflows if the plan becomes law.”
The bill’s political context
One component of the comprehensive legislation supported by President Trump, who has stated that the law will finance his campaign promises, is the remittance tax.
Other clauses include:
For those making less than $160,000 annually, there would be no federal tax on overtime or tips—a policy that Trump vigorously advocated during the 2024 campaign.
Trump Savings Accounts are being created, with a $5,000 yearly contribution ceiling and a $1,000 initial deposit for babies.
repeal of the excise taxes on indoor tanning services and firearms silencers.
For joint filers with incomes under $500,000, the SALT deduction threshold was raised from $10,000 to $40,000; however, the Senate is opposed to this provision.
a reduction in green energy tax credits, such as those for installing solar panels in homes and electric cars.
significant reductions in student loan programs.
