The Donald Trump administration has lowered the proposed remittance tax rate it plans to impose on funds sent abroad by non-US citizens, including to India, from 5 percent to 3.5 percent.
The change was introduced through an amendment to the 'One Big Beautiful Bill', which was passed by the US House of Representatives on Thursday.
Non-US citizens include H-1B, L-1, and F-1 visa holders, as well as green card holders. US citizens and nationals are exempt from this tax.
The Bill will now head to the Republican-majority Senate for final approval before it can be enacted into law.The original version of the Bill -- spanning major reforms in income tax, health care, corporate taxation, and federal debt -- included a 5 percent excise duty on outward remittances, to be paid by the sender.
It drew concern from immigrant communities and experts, especially given the volume of remittances flowing from the US to countries like India and Mexico.
A government official speaking on condition of anonymity said the Bill, if enacted, will have an impact on remittances into the country.
"The government has not made an assessment yet. No discussion has happened whether its removal can be a demand under the proposed India-US bilateral trade agreement," the official said.
India is the largest recipient of remittances from the US.
It received $32.9 billion in 2023-24, with a 27.7 percent share in the country's inward remittances, according to the Reserve Bank of India data.
Overall, such remittances have more than doubled from $55.6 billion in 2010-2011 to $118.7 billion in 2023-2024.
"In the short term, we expect remittances to India to spike before the effective date of January 1, 2026. We may also see a shift of some remittances from formal to informal channels," said Lloyd Pinto, Partner - US Tax at Grant Thornton Bharat. -- Monika Yadav & Asit Ranjan Mishra
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