In a move that is expected to affect Indian households, the One Big Beautiful Bill Act, which was passed by the U.S. House of Representatives on May 23, will levy a 3.5 per cent tax on outward remittances sent to other countries – including India.
A change was brought into effect via an amendment to the Act which cut down the originally proposed 5 per cent tax and inserted a 3.5 per cent duty on remittances.
The Bill contains massive changes to the US’ income tax, corporate tax, healthcare, and national debt level regulations, and is now awaiting to be passed by the Republican-majority senate in the US before it become a law.
While the Indian government is said to have not yet made an assessment of how much the tax will dent inward remittances, data by the Reserve Bank of India (RBI) shows that the U.S. is the largest source of remittances to India, accounting for 27.7 per cent (or $32.9 billion) of the remittances that flowed into the country in 2023-24. Tax experts suspect the impact could therefore be huge, especially on Indians living in the U.S.
“In the short term, we expect remittances to India to spike before the effective date of January 1, 2026,” says Lloyd Pinto, partner at US Tax at Grant Thornton Bharat.
“We may also see a shift of some remittances from formal to informal channels,” he explains, adding, “On outward remittance from US to India, for Indians who are green card holders or H1b/other visa holders living in the US, these groups will be subject to an extra 3.5 per cent tax on remittances over and above the income taxes they may have paid.”
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