New Delhi: 

A new tax proposal by the House of Republicans in the United States – which calls for imposition of 5 percent tax on all international money transfers made by non-US citizens – has caused uneasiness amongst the Non-Resident Indians (NRIs) in America.

The Bill which was introduced by May 12, 2025 by the Trump administration and is likely to be passed by 26th May. It may be noted that the Indian government earns from the money which is sent by the NRIs back to the country.

India has been the largest recipient of remittances since 2008. In 2023, the top five recipient countries for remittances inflows among LMICs in current USD were:
1 India (120 billion)
2 Mexico (66 billion)
3 China (50 billion)
4 the Philippines (39 billion)
5 Pakistan (27 billion)

The Migration Data report mentioned that India’s remittances have more than doubled from US$ 55.6 billion in 2010-11 to US$ 118.7 billion in 2023-24. India’s stock of international migrants has tripled from 6.6 million in 1990 to 18.5 million in 2024, with its share in global migrants rising from 4.3 per cent to over 6 per cent during the same period.

As a ratio to GDP, India’s remittances have hovered around 3 percent of GDP since 2000, while in the case of China, the ratio has remained below 0.3 per cent (Chart 2b). The Philippines, on the other hand, has received much higher remittances as a percentage of GDP during the last ten years.

Destination of Remittances in India

Maharashtra received the largest share of remittances in 2023-24: 20.5 percent

Kerala at second spot with 19.7 percent share

Tamil Nadu at third place with 10.4 per cent share

Telangana 8.1 per cent

Karnataka 7.7 per cent

According to a remittance survey published by RBI in March, of the total remittances of $118.7 billion in 2023-24, nearly 28 percent or $32 billion were from the US.

If this bill is enacted, even if we assume the remittance figure from the US to be constant, the Indian diaspora will end up paying $1.6 billion as remittance tax. According to the Indian foreign ministry, there are nearly 45 lakh overseas Indians in the US, including nearly 32 lakh PIOs.

It may be noted that Maharashtra, Telangana and Punjab accounted for the largest number of Indian students migrating abroad for education and staying back for employment opportunities, which is reflected in the increasing share of these states in India’s inward remittances.

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