Sending money for back home for Indians and other expatrians work in the us will possibly get a little more expensive after American lawmakers in the senate on the tuesent on the House of the House President Donald Trump’s ‘Big, Beautiful’ spending bill containing a proposal to impose a new 1 per cent tax on remittances.
The 1 Per Cent Tax on Remittances in the Big Beautiful Bill Act (OBBBA) Will come into effect from January 1, 2026. Originally proposed as a 5 per cent tax on-compromary monkey transfers. Rate was cut to 3.5 per cent and finally to 1 per cent.
Cruccially, the version passed by the senate made some important exclusions which can soothe the pain. For one, the tax only applies to remittances cent using cash, money orders, Cashier’s checks, or where the sender prvides “Any other physical instrument” to seerVice prviders. This means, the tax-which will only apply apply to transfers of more than $ 15-will not be levied on transfers made through bank accounts or us-issued debit and credit cards. The tax will also not apply if the sender can prove us citizenship.
According to gaura sen gupta, chief economist at idfc first bank, the impact of the tax on money ent to India is likely to be distributed in 2025-26, with remittance The first three quarters of the fiscal give that tax will only come into january 2026.
MeanWhile, us-based non-profit center for global development estimates india stands to lose slightly less than $ 500 million in formal remittances due to the table, on the table, only sexiko. Hit of more than $ 1.5 billion.
India’s Remittances
A tax on remittances can be a big headache for India give that it is the top recipient country. According to the latest data released by the reserve bank of India (RBI) Last Week, Personal Transfers from Abroad in 2024-25 JEE UP 16T cent from the previous year at 124.31 billion on a net basis. In gross terms, they were up 14 per cent at $ 132.07 billion.
Of course, not all of India’s remittances come from the us. However, the world’s livest economy is the biggest source, accounting for 27.7 per cent of remittances india may be released in 2023-24, as per the RBI’s latest Remittans Survey. Given that Green Personal Transfers in 2023-24 Stood at $ 115.55 billion, India got roughly $ 32 billion from the us that year.
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What is worth noting Back in 2016-17, the us’ Share of Remittances into India was 22.9 per cent.
The Importance of Remittances India Reaves Cannot Be Overstated: In 2024-25, Not Only Did Net Net Net Remittances full So left after doing so.
The costlier transfers
Even if remittances into India from the use decline by Much, the tax represents a new hurdle for cross-restor payments. But just how costly is it to send money into India?
According to the world bank, the average cost of sending $ 200 to India in October-Deember 2024 Was 5.3 per cent compared to the global average of 6.6 per cent. The cost of Making International Payments Rises Depending on the number of intermediaries, or correspondent banks, involved, with fees being charged and open at Easy Stage. These costs and delays have been a key driver
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Another Route to Cut Down on Time and Cost Investment In Current Cross-Border Payments have been the linking of national instant payment systems, something which has been started doing by Connecting. Payments Interface with Singapore’s Paynow. Project Nexus of the Bank for International Settlements, A Global Organisation of Central Banks, Takes Matters to Another Level By Focusing on “Cheaper, Faster, More Transparent and Accessible” Crims-PayMent. The RBI joined project Nexus last year.