Hidden deeply in a clause in Donald Trump's huge "A Big and Beautiful Bill Act" that can be quietly spent from money sent abroad.

It proposes a 3.5% tax on foreign workers' remittances abroad, including green card holders and temporary visa workers such as H-1B visas. Experts say that for India, India is the world's highest remittance recipient - that's serious. Other major recipients include Mexico, China, the Philippines, France, Pakistan and Bangladesh.

In 2023, Indians abroad sent US$11.9 billion (£88 billion) - enough to raise funds for half of India's commodity trade deficit and funds that exceed foreign direct investment, according to a paper by economists at the Reserve Bank of India (RBI). Among them, the largest share comes from the United States. For millions of immigrants, that includes money involving covering parents’ medications, nephew’s tuition or mortgage loan to go home.

The blunt imposition of remittances could browse billions of dollars from immigrant workers, many of which are already paying taxes in the United States. Possible results? Informal, untraceable cash transfers and the dent of India's most stable sources of external financing have increased.

According to the World Bank, India has been the highest recipient of remittances since 2008, with its share rising from 11% in 2001 to 14% in 2024. The central bank said it expects remittances to remain strong, with an estimated $160 billion by 2029. Since 2000, the country's remittances have hovered around 3% of GDP.

India's international migrant population increased from 6.6 million in 1990 to 18.5 million in 2024, and its global share rose from 4.3% to more than 6%. Although the Gulf still has nearly half of all Indian immigrants, skilled immigration has taken on significant growth to advanced economies, especially the United States, due to India's global IT footprint.

The US remains the top source of remittances worldwide, with its share rising from 23.4% in 2020–21 to nearly 28% in 2023–24, driven by a strong post-pandemic job recovery and a 6.3% rise in foreign-born workers in 2022. Notably, 78% of Indian migrants in the US work in high-earning sectors such as management, business, science, and the arts.

Due to the cost and currency conversion, remittance costs have been a global policy issue because of their impact on households. Although the average of global costs is still above the target, India is one of the most affordable destinations, reflecting the rise of digital channels and increasing competition in the market.

Ajay Srivastava of the Delhi-based think tank Global Trade Research Program (GTRI) said remittances fell 10-15%, costing $1.2-1.8 billion a year, tightening the dollar supply and putting pressure on the rupee. He believes that central banks may have to intervene more frequently to stabilize the currency.

The bigger blow will land on families in states such as Kerala, Uttar Pradesh and Bihar, where remittances fund essentials such as education, health care and housing. Mr Srivastava said in a note that the tax could “suffer a difficult crisis” even as the Indian economy struggles to cope with global uncertainty and inflation.

The remittance tax could squeeze India’s household budget, weaken consumption and investment and undermine one of India’s most stable foreign exchange sources, warning a brief introduction to the Delhi-based WTO Research Centre. Maharashtra, followed by Kerala and Tamil Nadu, continues to be the main recipients.

Remittances in India are mainly used for household consumption, savings and investment in assets such as housing, gold and small businesses. According to the policy summary of the think tank's Pritam Banerjee, Saptarshee Mandal and Divyansh Dua.

A decline in inflows can reduce domestic savings and reduce investment in financial and physical assets. The summary says that when remittance inflows decline, households may “prioritize consumption needs (such as food, health care and education) over savings and investment.”

A study by the Washington-based think tank Global Development Center shows that the proposed tax could significantly reduce formal transfers, with Mexico facing the biggest hit - more than $2.6 billion a year. Other major losers include India, China, Vietnam and several Latin American countries such as Guatemala, the Dominican Republic and El Salvador.

To be sure, there is still some chaos in the taxation, and the final approval is in Senate action and the signing of the president.

“Taxes apply to all non-citizens, even embassy and UN/World Bank staff. But those who pay taxes can require tax credits. Therefore, the remittance tax applies only to immigrants who do not pay taxes. This mainly includes unauthorized immigration (and diplomats (and diplomats), “Dilip Ratha, Dilip Ratha, World Bank Economics Economics Economics for Immigration and Residents’ BBC, BBC, BBC.

Dr. Ratha wrote in a note on LinkedIn that immigrants will try to cut costs of remittances by turning to informal methods - to carry cash by hand, send money through friends, couriers, bus drivers or airline employees, arrange local monetary spending through friends in the United States, or use Hawala, Hundi and Cryptocirencies to arrange local monetary spending.

"Will the proposed taxes cause unauthorized immigration to the United States? Will it encourage unauthorized immigrants to return home?" Wondering about Dr. Ratha.

He said, not yet. The minimum wage job in the United States earns $24,000 per year, four to 30 times that of many developing countries. Dr. Ratha estimates that immigrants usually send between $1,800 and $48,000 a year to go home.

“The 3.5% tax rate is unlikely to stop these remittances. After all the major immigration motives – migrant motives that try to cross the oceans, rivers and mountains – are sending money home to help helpless family members.”