US lowers remittance tax to 3.5%: A partial win for Indian diaspora

In a move that offers partial relief to Indian residents in the United States, the proposed U.S. tax on remittances has been reduced from 5% to 3.5%. The revision is part of President Donald Trump’s “One Big, Beautiful Bill Act,” which targets immigration, trade, and cross-border money transfers.

The change comes amid political resistance and behind-the-scenes adjustments to the legislation. For over 4 million Indians in the U.S.—including professionals, students, and green card holders—this means a slightly lower cost when sending money back home.

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Under the new rate, a $1,000 remittance will be taxed at $35, instead of the earlier proposed $50.

However, the larger impact remains negative. According to the Reserve Bank of India, India received $129 billion in remittances in 2024. Nearly 28% of that—about $25 billion—originated from the U.S.

With the new 3.5% tax in place, the Global Trade Research Initiative (GTRI) estimates a 10–15% decline in U.S.-origin remittance flows. This could translate into a $12–18 billion shortfall—posing a significant risk for both Indian households dependent on foreign income and the national economy.

The relief may be smaller than it seems. The pressure on remittances is real, and the financial impact on India could be substantial.