Trump's tax on remittances won't have big impact on Indian economy

The Trump administration's proposed 5% tax on all remittances sent abroad is not likely to have a significant impact on the Indian economy, officials and economists said. The exact impact will be known once the details of the tax are known. It may not have any significant impact if the 5% levy is allowed to be set off against tax liability.

"It will certainly put a strain on the Indian diaspora and will dampen the morale but the impact on the Indian economy and Indian rupee may not be as significant," a senior official told ET.

According to the Global Trade Research Initiative (GTRI), the proposed US tax on remittances may weaken the Indian Rupee by ₹1-1.5 per US dollar if the remittance shock plays out fully.

Officials say this may set a precedence for other countries but it was premature to give a number at this point of time.

"The fine print of the law are unclear and while this may have an impact, people will not stop sending money back home due to the tax... but other countries may adopt similar moves," the official said.

The proposed levy on remittance has the potential to drain $1.75 billion from India's remittance kitty .