Starting July 4, 2025, the United States will begin charging a 1% tax on money sent abroad by anyone who is not a US citizen.
What is the New Remittance Tax?
This includes Indian nationals living in the US on H-1B work visas, Green Cards, student visas (F-1), and other temporary permits. The tax will apply to all money transfers made through cash, money orders, or cashier’s cheques.
For example, if an Indian in the US sends $1,000 (around ₹84,000) to their family in India, an extra $10 (about ₹840) will be charged as tax. This money will be collected by the bank or money transfer service used for the transaction. Companies like Western Union, MoneyGram, and even banks will then send this tax to the US government every quarter.
Originally, the US government had planned to charge a 5% tax. However, after discussions and feedback, it was reduced to 1%. Even though it sounds small, this new rule can add up to a big amount for those who send money home regularly.
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Why This Matters for Indians in the US
India is the world’s top receiver of remittances, or money sent home by people living abroad. In 2024, India received $129 billion in international remittances. A large chunk—nearly 28%—came from the United States alone. That’s more than $36 billion sent from the US to India in one year.
Many families in Indian states like Kerala, Bihar, and Uttar Pradesh depend on this money for their daily living. The extra 1% tax now means less money reaching their homes. Over time, this could affect not just families, but also small towns and villages where this money is often used for food, education, healthcare, and building homes.
Indians working in the US often send a part of their salary to support parents, pay off home loans, or invest in Indian properties. The new tax might make people think twice before transferring large sums, especially if they already pay other service fees.
Students and Parents Also Face a Bigger Burden
The rule also hits students from India studying in the US. Many students rely on family support to pay their tuition, rent, and living expenses. But now, if parents send $10,000 (roughly ₹8.4 lakh) a year, they will have to pay an extra $100 (around ₹8,400) in tax.
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On top of this, Indian families are already facing challenges due to visa delays, tighter US immigration policies, and increased scrutiny of financial documents. Many are becoming more cautious about sending money abroad.
Recent data shows that Indian families are sending less money for education overseas. In fact, money sent for education dropped by 16% in 2024-25. Parents are now choosing to delay or reduce the amounts they send, especially with growing uncertainty around job prospects and work visas after graduation.
Indian banks and loan providers are also adjusting to this change. Instead of giving large loans upfront, they are now breaking up payments based on semester schedules. This way, families can avoid sending big sums before visa approvals or university confirmations.
Some fintech companies and NBFCs (non-bank finance companies) are reporting a drop in high-value international transactions. Families are trying to send smaller, staggered amounts and waiting for clearer rules before committing big funds.
Overall, the new 1% remittance tax may not seem like much at first glance. But when added to the rising cost of living, education, and travel, it creates an extra burden for Indian workers and students in the US.