The US Senate has revised its draft of the “One Big Beautiful Bill Act,” reducing the proposed remittance transfer tax from 3.5% to just 1%. This significant reduction is a direct response to widespread concerns among the Indian diaspora about the financial burden of sending money home, and it marks a major policy shift likely to impact remittance flows between the US and India.
The Senate’s latest draft brings the remittance transfer tax down from the previously proposed 3.5% to just 1%, providing substantial relief to NRIs and other non-citizens sending money abroad. Transfers made from US-based bank accounts and transactions using US-issued debit or credit cards are now exempt from the tax. This means that most day-to-day remittance activities, such as supporting family or making regular investments, will not be affected by the new tax regime.
The revised tax will only apply to qualifying remittances made after December 31, 2025. This gives individuals and businesses ample time to adjust their financial planning and remittance strategies. The tax specifically targets non-citizens, including H-1B visa holders, green card holders, and international students. It applies only to transfers initiated with cash, money orders, cashier’s checks, or similar physical instruments, further narrowing its impact.
The United States is home to over 2.9 million Indians, making them the second-largest foreign-born group in the country. In the financial year 2023-24, remittances from the US to India accounted for nearly $32 billion, or 27.7% of India’s total inward remittances. The initial proposal of a higher remittance tax had sparked anxiety among NRIs, many of whom regularly send money home to support families or invest in India.
The revised Senate draft directly addresses these concerns by exempting most routine transfers. According to experts, the new provisions ensure that “the NRI community in the US will not be subject to this remittance tax if the remittances are made through accounts held with designated US banks and financial institutions or funded via debit or credit cards issued in the US”.
Remittances are a vital economic lifeline for many developing countries, including India. The Reserve Bank of India’s latest survey highlights the growing importance of advanced economies in India’s remittance landscape, with the US now the largest single source. The Senate’s move to soften the tax is expected to maintain the steady flow of funds that support millions of families and drive economic growth in India’s rural and urban communities.
While the tax reduction and exemptions are widely welcomed, some areas may still be affected. Transfers made using cash or physical instruments, as well as certain corporate mobility programs and NRE account deposits, could fall under the new tax. Additionally, part-time student earnings or internship income sent home after graduation may also be subject to the levy.
