Giving a major boost to the efforts for bailing out troubled American financial firms, the US Senate has approved the $700 billion rescue package proposed by the Bush administration, with some modifications.

The Senate passed the bill, which incorporated tax cuts and a higher insurance limit for bank deposits, by a wide margin 74-25 on Wednesday evening.

• All about the US bailout plan

The modified rescue package will now go to the House of Representatives, which had voted against the original proposal on Monday.

• US financial crisis: Complete coverage

In the Senate, 40 Democrats, 33 Republicans and one independent voted in favour of the bill while nine Democrats, 15 Republicans and one independent voted against it.

Along with proposed tax cuts for businesses, the modified bailout plan includes raising the limit on federal insurance for bank deposits to $250,000 from the current $100,000, which sweetened the demands of Republicans and Democrats in the House of Representative.

"I believe members of both parties in the House can support this legislation. The American people expect and our economy demands that the House pass this good bill this week and send it to my desk," President George W Bush said in a statement.

The finer aspects of the Senate legislation also looked at ways to prevent the more than 20 million middle class taxpayers from feeling the pinch of the alternative minimum tax.

The proposal for increasing the deposit insurance limits had the backing of presidential candidates and many American law makers, after the House of Representatives, rejected the bailout plan on Monday.