Called the ‘Excise tax on remittance transfers’, the newly proposed provision will be effective from January 1, 2026.
Remittances
- Definition:The movement of funds from the country of work back to a home country is known as remittances.
- In 2023, remittances back to home countries totalled about $656 billion.
- India got 14.3% of global remittances in 2024 (its highest ever).
Key highlights of the Bill
- Remittance tax (excise tax) will apply only to non-US citizens and US citizens are exempted.
- Affected groups include Visa holders (H-1B, F-1), Green card holders, etc.
- The bill reduced the Outward remittance tax from 5% to 3.5%.
Impact of Excise tax on remittance transfers
- Global Economic ripple: Countries like El Salvador, Mexico, India, which rely on US remittances, may face economic setbacks.
- The proposal may also discourage foreign workers from maintaining assets or employment in the US.
- Dent India’s Inward Remittance Flow: The United States is the largest source of remittances to India, accounting for $32.9 billion of the total remittance inflows in 2023-24.
- A remittance tax could push some funds from Indians in the U.S. to grey or black markets, bypassing regulation.
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