Trump’s remittance tax ‘impact will be minimal’ for NRIs | Interview

The United States is introducing a federal remittance tax on non-citizens, including NRIs, H1B workers, students, and even green card holders. With Indian remittances forming a significant portion of inward flow, what does this tax mean for senders, and could it push people towards informal routes? Sumeet Gulechha, COO of GoGenAI, shares his insights on the implications and the larger context of US-India trade ties.

What exactly has changed with this new US federal remittance tax and why was it introduced?

For the first time, the US will impose a tax on money sent out of the country by non-citizens, including H1B visa holders, students, and green card holders. Initially proposed at 5 per cent, the tax has been reduced to 1 per cent after public pushback. Importantly, this applies only to non-bank transfer channels — like money orders or cash transactions — and is aimed at making life harder for undocumented immigrants who often use these methods.

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Given that people often use these channels during emergencies, how significant will the impact be?

For Indian remitters, the impact will be minimal. Most Indians in the US use formal banking channels. The use of money orders or cash for sending money is rare among professionals, students, and those with bank accounts. The tax is aimed more at undocumented immigrants.

Could this tax push people towards informal routes like hawala or crypto?

Unlikely. The tax rate is too low to create a strong incentive for unofficial routes. In fact, using informal means usually results in worse exchange rates, which is the major cost of remittance. Formal channels remain the better choice in terms of cost and security.

Also read: US President Trump signs major tax and spending cuts into law

So the key preparation for NRIs would be to ensure they have proper bank accounts?

Yes, absolutely. Anyone who doesn’t have a formal bank account should open one before January 2026. That’s the simplest way to avoid unnecessary complications.

On another note, do you think the US is finally catching up with countries like India on digitization, given Trump’s executive order to digitize federal agencies?

Yes, digitizing federal agencies is a low-hanging fruit and long overdue. The US has lagged behind countries like India, China, and Japan in digital payments. This is a chance to improve efficiency and transparency, especially in areas like remittances where current systems are slow and opaque. The US could benefit greatly by adopting systems like India’s UPI.

Also read: Timeline of India-US mini-trade deal: Trump, Modi and 3 months of talks

With ongoing talks about Trump tariffs and trade deals, is India’s IT sector affected?

No, the tariffs are focused on goods — cars, steel, aluminium, agriculture — not services. In services, the US runs a surplus and wouldn’t want to harm that advantage. So, the Indian IT sector is unaffected for now.

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