U.S. government moves to cut proposed tax on outward remittances to 3.5% from 5%

The One Big Beautiful Bill Act was passed by the U.S. House of Representatives on May 22, 2025.
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New Delhi

The U.S. government has decided to cut the tax it plans to levy on outward remittances sent to other countries, including India, from the earlier planned 5% to 3.5%. This change was implemented through an amendment to the One Big Beautiful Bill Act passed by the U.S. House of Representatives on Thursday (May 23, 2025).

The original version of the Bill, which contained sweeping changes to the U.S.’s income tax, healthcare, corporate tax, and national debt level regulations, had proposed a 5% excise tax on remittance transfers which would be paid by the sender. 

Now, the U.S. House of Representatives, while passing the Bill, also approved a list of amendments to it. Among these was one relating to the rate of excise duty on remittances, saying “strike ‘5 per cent’ and insert ‘3.5 per cent’”.

The Bill will now have to be passed by the Republican-majority Senate in the U.S. before it becomes law.

The Hindu has learnt that the Indian government has not yet made any estimation of what impact such a tax would have on inward remittances. Reserve Bank of India data shows the U.S. is the largest source of remittances to India, accounting for 27.7% or  $32.9 billion of the remittances that flowed into the country in 2023-24.

“A tax on remittances would certainly dent the remittances coming into India,” a government official told The Hindu. “But the government has not yet made an assessment of what that dent will be.” 

The official also added that India has also not yet taken a call on whether to approach the U.S. for some relief in the matter or not. 

According to tax experts, the impact could be quite significant on Indians living in the U.S., and could push some of the remittances they send to India to the grey or even black market. In the short term, however, it may lead to a spike in such remittances. 

“On outward remittance from U.S. to India, for Indians who are green card holders or H1b/other visa holders living in the U.S., these groups will be subject to an extra 3.5% tax on remittances over and above the income taxes they may have paid,” Lloyd Pinto, Partner – U.S. Tax at Grant Thornton Bharat explained. 

“In the short term we expect remittances to India to spike before the effective date of Jan 1, 2026,” Mr. Pinto added. “We may also see a shift of some remittances from formal to informal channels.”