In today’s Finshots: We talk about Trump’s proposed 5% tax on foreign remittances, how it could hit Indians living in the US (and their families here), and we use purchasing power parity to compare a ₹20 lakh job in India with what it takes to earn the same lifestyle in America.
The Big Announcement
Earlier this month, former US President Donald Trump revealed a legislative proposal called the “One Big Beautiful Bill.” Among the headlines it generated, one clause stood out — a 5% tax on all international remittances sent by non-US citizens.
That’s right. If you’re on an H1-B visa in the US and you send money back home to your family in India, you might soon have to cough up an extra 5% just in taxes.
And it’s already making waves in India — the largest recipient of US remittances.
Why is Trump doing this?
Well, it’s election season. And Trump’s proposal is part of a larger anti-immigration and America-first narrative. The stated idea is that undocumented migrants and non-citizens should be taxed for using US infrastructure and benefits — and this remittance tax is seen as a way to fund enforcement measures like border security and immigration control.
The tax isn’t new — it was floated in 2016 too. But this time, it’s part of an actual legislative proposal, which means it’s being taken a lot more seriously.
So, how does this tax work?
- It applies to non-citizens only — that includes people on work visas, student visas, and even green card holders (but not US citizens).
- The tax is collected at the time of remittance by banks and service providers like Western Union or online transfer platforms.
- It applies to all amounts — whether you’re sending $100 or $10,000.
- And it’s being pitched as a federal tax, so it’s in addition to any state or service fees already being paid.
Who’s impacted?
Indians — in a big way.
According to the World Bank, Indians in the US sent home $32 billion in remittances in FY23-24, making the US the single biggest contributor to India’s inbound remittance flow.
A 5% tax on that figure? That’s $1.6 billion in extra taxes — directly from the wallets of Indian expats.
If you’re sending $1,000 (roughly ₹83,000) every month to your parents in Chennai or Lucknow, that’s an extra $50 (~₹4,150) per month just in taxes.
Over a year, that’s ₹50,000 — about one month’s rent in many Indian cities.
But will it actually pass?
Tough to say.
- Trump isn’t in power yet — and whether this bill even gets taken up depends on the results of the 2024 US presidential elections.
- It may face legal and economic hurdles, especially from tech companies and states that benefit from skilled immigration.
- Remittance platforms like Wise and Remitly could also lobby against it, arguing that it will discourage formal channels and push people into using informal, unregulated routes.
That said, even the possibility of such a tax could affect Indian students, workers, and families planning finances across borders.
What about India?
For India, this could hit household incomes hard.
Millions of Indian families depend on regular inflows from relatives in the US — to pay EMIs, fund education, or take care of elderly parents. If remittances dip because of the added tax, domestic consumption could take a hit.
States like Kerala, Punjab, UP, and Bihar — which are highly remittance-dependent — could feel the pinch most.
And since remittances are India’s largest source of forex reserves, even the rupee could feel some heat.
Let’s talk numbers: ₹20 lakh in India = how much in the US?
There’s another angle to this story that many people ask: How does a job in India compare to one in the US, really?
Let’s say you have an offer for ₹20 lakh per annum here in India. What would you need to earn in the US to match that lifestyle?
Enter Purchasing Power Parity (PPP) — a way to equalize the cost of living across countries by looking at what a “basket of goods” costs in each place.
By PPP standards:
- A ₹20 lakh salary in India is equivalent to roughly $75,000–$80,000 in the United States.
- Why? Because while the dollar is stronger in nominal terms, the cost of living in the US is significantly higher.
- Rent: 2–3x more than in Indian metros
- Healthcare: Can be exorbitant
- Childcare, education, insurance: All more expensive
So if you’re earning $100,000 in the US and sending home ₹1 lakh a month, you’re doing well — but a 5% tax on remittances could still sting.
The Bottom Line
Trump’s proposed 5% remittance tax isn’t law yet — but it’s on the table.
If implemented, it could affect millions of Indians living abroad, remittance-dependent families back home, and India’s macroeconomic stability too.
And it reminds us that when evaluating foreign job offers or planning NRI finances, taxes, cost of living, and PPP adjustments matter just as much as the raw salary number.
For now, it’s worth watching the developments — and maybe keeping that international money transfer on hold.
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