US House of Representatives Passes the ‘One, Big, Beautiful Bill’ (OBBB)

The US House of Representatives has approved Donald Trump’s comprehensive tax and spending bill, known as the ‘One, Big, Beautiful Bill’ (OBBB). This bill includes significant tax cuts, immigration reforms, military funding increases, and changes to healthcare and welfare programs.

Impact on India and Remittances

• The bill introduces an excise tax on outward remittances from the US to other countries, initially set at 5% but reduced to 3.5%.
• This tax affects non-citizens and foreign nationals in the US, including the 5.4 million Indians (PIOs and NRIs), who make up 1.6% of the US population.
• Indian Americans are the wealthiest non-White ethnic group in the US and maintain strong ties with their families in India, often sending remittances.

Economic Significance of Remittances

• Remittances form a crucial part of India’s economy, contributing over $129 billion or 3% of its GDP.
• The US is the largest source of remittances to India, accounting for nearly 28% of total inflows in FY24, surpassing the UAE (19.2%).
• Remittances are India's second-largest fund source after service exports and provide stable inward inflows during volatility.

Potential Consequences of OBBB

• The bill could reduce remittances from expatriate non-US citizen Indians by approximately $1.6 billion.
• NRIs, H-1B visa holders, international students, and non-US citizens, including green card holders, will be directly affected.
• Indian states offer incentives to NRIs, who may consider offshore incorporation to avoid taxes or explore alternative channels like cryptocurrency.
• Investment in real estate in India could be delayed or scaled down, affecting townships and projects in states favored by NRIs.

Taxation Concerns and Emotional Impact

• Unlike income tax, excise taxes are typically non-deductible in US or Indian filings, preventing NRIs from claiming rebates.
• In India, tax collected at source (TCS) is applicable on outward remittances above ₹7 lakh, adjusted at the time of income tax filing.
• Taxing remittances may create alienation among Indian Americans, reduce interest in buying homes, or affect plans to retire in India.

Recommendations for the Trump Administration

• Avoid disincentivizing remittances by considering investment-linked tax credits or tiered taxation on transfers above $250,000 annually.