Archive · 23 May 2025
US Lowers Tax on Outward Remittances to 3.5%
The US government is changing a tax on money sent from the US to other countries, including India.
Originally, the plan was to tax these transfers at 5%, but it's now set at 3.5%.
This change was approved by the US House of Representatives.
The bill still needs to pass the Senate to become law.
India is the largest receiver of remittances from the US.
Experts believe this tax could significantly affect Indians in the US, potentially leading to some money being sent through less official channels.
There might be a short-term increase in remittances before the tax begins on January 1, 2026.
The US government reduced the proposed tax on outward remittances to 3.5%.
The change was made through an amendment to the One Big Beautiful Bill Act.
The original bill proposed a 5% excise tax on remittances.
The US is the largest source of remittances to India.
The tax could affect remittances to India, and may shift some to informal channels.
- Who
- The US government, impacting senders of remittances.
- What
- The US government is reducing the proposed excise tax on outward remittances from 5% to 3.5%.
- When
- The amendment was approved on May 23, 2025. The effective date of the tax is expected to be January 1, 2026.
- Where
- United States, specifically impacting remittances to India.
- Why
- The reason for the tax is not stated in the provided article.
Potential Short-Term Effects
Potential Long-Term Effects
Impact on Remittances
Potential Short-Term Effects
Tax may cause an initial spike in remittances before its implementation.
Potential Long-Term Effects
Tax on remittances may reduce the flow of money to India.
- Proposed Tax Rate
- 3.5%
- Original Tax Rate
- 5%
- Amendment Date
- May 23, 2025
- Expected Effective Date
- January 1, 2026
- Largest Source of Remittances to India
- US
- Remittances from US to India in 2023-24
- $32.9 billion