US and Canada to India Remittances 2026: The 1% Tax, Costs and Student Flows
US and Canada to India remittances in 2026: corridor size, who pays the new 1% US remittance tax, World Bank costs from both countries and the student effect.
Key takeaways
- The United States supplied 27.7% of India's remittances in 2023-24, roughly $33 billion, and India's total private transfers reached a record $135.46 billion in 2024-25.
- The 1% US remittance tax that began in January 2026 applies only to transfers funded with cash, money orders or cashier's checks, not to bank account or card-funded transfers.
- Sending money from Canada to India averaged 4.28% in late 2025, well above the US average of 2.92%, while student permit caps are reshaping the Canadian corridor.
A cardiologist in Houston sends $3,000 to his parents in Hyderabad every quarter from his checking account, and the new US remittance tax does not touch him. A construction worker in Queens who sends $300 to Ludhiana in cash at a neighbourhood money transfer counter pays an extra $3 every time. Same corridor, same destination country, different tax, and the difference comes down to how the money was paid in. That split sums up the North America to India corridor in 2026: overwhelmingly digital, increasingly cheap, and with a shrinking cash minority that is now paying more.
The biggest single source of India's remittances
India received a record $135.46 billion in private transfers in 2024-25, up 14% on the year, according to RBI data. The United States is the largest contributor. The RBI's sixth remittances survey found the US accounted for 27.7% of inflows in 2023-24, up from 23.4% in 2020-21. On that year's total of about $118.7 billion, that implies roughly $33 billion. Advanced economies led by the US, UK, Canada, Australia and Singapore now supply more than half of India's remittances.
That shift towards skilled migrants in rich countries changes the shape of the money. Transfers are larger and more digital: 73.5% of remittance transactions to India were digital in 2023-24, the RBI survey found.
The 1% US remittance tax: what it covers
Since 1 January 2026, a 1% federal excise tax has applied to some remittance transfers from the US under section 4475 of the tax code, added by the One Big Beautiful Bill Act signed in July 2025. The scope is narrow. It applies only when a transfer is funded with cash, a money order, a cashier's check or a similar physical instrument. Proposed Treasury regulations published in April 2026 indicate that transfers funded from a US bank account or with a US-issued debit or credit card are exempt, as are ordinary wires and ACH payments, according to a summary by Greenback Tax Services. The test is where the sender is located, not citizenship. Providers collect the tax at the point of sale and report it to the IRS.
For India, the direct hit is small. The Niskanen Center estimates inflows could fall by about $466 million, a fraction of a percent of the corridor. In Mexico, where FXC Intelligence says cash-funded transfers were only about 1% of inflows, the effect has been limited too. The bigger effect is behavioural: the tax gives cash users one more reason to switch to a bank account or card. Our US-Mexico corridor analysis looks at that shift.
Source RBI remittance survey, 2023-24 (GCC states 38% in total, UAE 19.2%); RBI balance of payments 2024-25; IFAD 2025.
What sending costs from the US and Canada
World Bank data for the third quarter of 2025 shows a clear gap between the two North American corridors. Sending $200 from the US to India cost 2.92% on average, with a fee of about $4.20 and an exchange margin of about 0.82%. Sending CAD 200 from Canada to India cost 4.28%, with a fee of about CAD 6.09 and a margin of 1.23%. The UK, by comparison, averaged 1.91%, as we explain in our UK to India guide.
| Corridor | Average cost | Average fee | FX margin | Cheapest in sample |
|---|---|---|---|---|
| US to India ($200) | 2.92% | about $4.20 | about 0.82% | below zero (one bank-linked option) |
| Canada to India (CAD 200) | 4.28% | CAD 6.09 | 1.23% | 0.86% |
| UK to India (£120) | 1.91% | £1.58 | 0.59% | 0.15% |
The ranges are wider than the averages suggest. In the US sample, one bank-linked option was priced slightly better than the reference rate, while the dearest money transfer operator cost 6.35%. In Canada the cheapest bank transfer cost 0.86%, but a branch transfer at a large domestic bank cost 28.33% of the amount sent. In both countries, branch counters are where costs balloon.
The new US tax is less a toll on remittances than a push away from cash.
Canada: a smaller corridor reshaped by student caps
Canada supplied 3.8% of India's remittances in 2023-24, roughly $4.5 billion on that year's total. Its profile is unusual. Many Indians in Canada arrived as students and moved into work through post-graduation permits, so money flows both ways: families in India pay tuition and living costs, and graduates who find jobs start sending money home.
That pipeline has narrowed. Ottawa has capped new international study permits since 2024, and reports based on government data indicate that permits for Indian students fell by about half in 2025, according to The Wire. Fewer students today means fewer young workers remitting later. It also explains why cost matters so much here: at 4.28%, Canada is the most expensive of India's big Western corridors, and many senders are on entry-level wages. For the outbound side, see our guide to paying international student fees.
Digital versus cash
For most Indian Americans and Indo-Canadians the question is no longer whether to go digital but which digital route to use. The World Bank's global data shows digital transfers averaging 4.85% in early 2025 against 7.16% for non-digital ones, and in the US the cash side now carries an extra 1%. Anyone still sending cash can usually save simply by opening a basic bank account or paying the same provider by debit card. The other habit worth changing is the reflexive use of a big bank's branch wire, which in both countries produced some of the worst prices in the World Bank sample.
Speed has stopped being a reason to pay more. Many digital transfers to Indian bank accounts now credit within minutes once the provider releases the funds, so the main trade-off is between price and convenience features such as rate alerts, scheduled transfers and saved recipients. Those are worth having, but not at the cost of a percentage point on every transfer.
Where the money goes, and paying it directly
A lot of North America's money to India covers recurring obligations: parents' medical and household costs, home loan instalments, insurance premiums, property tax and younger siblings' school fees. A Canadian fintech began offering direct payment to more than 21,000 Indian billers through Bharat Connect in Canadian dollars in February 2025, and NRIs with US or Canadian mobile numbers can link UPI to NRE or NRO accounts and pay bills in rupees. Our NRI bill payments guide compares the routes.
What to watch next
Three things. First, the final Treasury rules on the remittance tax, which should settle edge cases the proposed version left open. Second, Canada's student intake, which will shape that corridor's remittances for years. Third, the rupee: after sliding past 95 to the dollar in 2026, each dollar sent buys more at home, and a weak rupee has historically pulled transfers forward. None of that changes the basic advice, which is to fund transfers electronically, compare the rupees delivered and stay away from branch wires.
This article is general information, not tax or financial advice.
Frequently asked questions
Does the 1% US remittance tax apply when I send money to India from my bank account?
No. The tax applies only to transfers funded with cash, money orders, cashier's checks or similar physical instruments. Transfers funded from a US bank account or a US-issued debit or credit card are exempt under the proposed Treasury rules.
Is it cheaper to send money to India from the US or from Canada?
In World Bank data for the third quarter of 2025, sending $200 from the US to India averaged 2.92%, while sending CAD 200 from Canada averaged 4.28%. The cheapest options in both corridors cost under 1%.
How much money do Indians in the US send home?
The RBI's sixth remittances survey found the US accounted for 27.7% of India's inward remittances in 2023-24, which works out to roughly $33 billion on that year's total of about $118.7 billion.
Sources and further reading
- All India Radio: Remittances scale record high of $135 billion in FY25
- Cherry Bekaert: Excise tax on remittance transfers, IRC Section 4475 explained
- Greenback Tax Services: IRS proposed regulations on the 1% remittance tax
- Niskanen Center: The 1% US remittance levy, impacts on Mexico and India
- World Bank Remittance Prices Worldwide: US to India corridor
- World Bank Remittance Prices Worldwide: Canada to India corridor
- The Wire: 50% drop in study permits issued to Indian students by Canada in 2025
This article is for general information and is not financial, legal or tax advice. Figures are as reported by the sources above at the time of writing.
