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.