Starting January 1, 2026, outward remittances made by immigrants living in the US are required to pay a ‘remittance tax’ to the US Treasury. Trump’s One Big Beautiful Bill Act imposes a 1% tax on money transferred from the US to foreign nations.
Called the ‘Excise tax on remittance transfers’, the tax rate was initially proposed to be 5%, but later on it was reduced to 3.5% of the amount sent by immigrants to their home countries. Before being passed by the Senate, the ‘remittance tax’ was further reduced to 1%. The US tax on remittance to India and all other nations becomes effective on January 1, 2025.
Transactions Subject to Remittance Tax
The impact of remittance tax has been significantly reduced because it exempts remittances made from bank accounts and other financial institutions, as well as those made with debit or credit cards, from the tax.
The 1% tax will now only apply to cash, money orders, and cashier’s checks. The US government’s newly implemented remittance tax will not apply to US citizens or nationals who use a ‘qualified remittance transfer provider’.
Beginning January 1, 2026, remittance transfer providers are mandated to collect the 1% excise tax on applicable remittance transactions when the sender pays with cash, a money order, a cashier’s check, or a similar physical instrument.
Who is Impacted the Most
US remittance tax is an ‘excise tax’ on international money transfers made by non-US residents residing in the United States, such as NRIs, green card holders, foreign students, and other immigrants in America.
NRIs, H-1B and other foreign workers, and Indian students will be the most affected by the remittance tax, unless they use the tax-exempt ways to send money to their home country, after January 1, 2026.
The impact could be severe on Mexico, India, China, and the Philippines, as they are the largest recipients of U.S. remittances. The top five recipient countries for global remittances in 2024 were India, with an estimated inflow of $129 billion, followed by Mexico ($68 billion), China ($48 billion), the Philippines ($40 billion), and Pakistan ($33 billion). The share of the US in India’s total remittances remained the largest, rising to 27.7 per cent in 2023-24, nearly $33 billion.