The U.S. House of Representatives has passed the “One Big Beautiful Bill Act,” which introduces a 3.5% excise tax on outward remittances made by non-U.S. citizens. This has sparked concern among Non-Resident Indians (NRIs) in the U.S., many of whom regularly send money back home to support families, invest in property, or manage financial obligations in India.
Key Highlights of the Proposal
Revised Tax Rate: Initially proposed at 5%, the remittance tax has been reduced to 3.5%.
Effective Date: If passed by the U.S. Senate, the law will become effective from 1st January 2026.
Who Will Be Taxed: The tax will apply to non-U.S. citizens or nationals, including H-1B visa holders, F-1 student visa holders, temporary workers, and green card applicants (until they become citizens).
Who Is Exempt: U.S. citizens and nationals are fully exempt from this tax.
Why It Matters to NRIs
India remains the world’s largest recipient of remittances, with U.S.-based Indians contributing nearly 28% of the $129 billion India received in 2024. A 3.5% excise tax means every $10,000 remitted would attract a $350 tax, directly reducing what families in India ultimately receive.
What Should NRIs Do Now?
Pre-plan Remittances: If you expect to send large amounts in 2026 or later, consider advancing those remittances before January 1, 2026.
Compare Transfer Methods: Look at bank transfers, money transfer platforms, and investment-linked transfers for tax-efficient options.
Get Professional Advice: Speak to a U.S.-licensed tax advisor or India-U.S. cross-border expert to understand how to legally minimize tax impact.
FAQs: Common Questions NRIs Are Asking
Yes, the tax is specific to non-citizens in the U.S. making foreign remittances. NRIs based in other countries like the UAE, UK, Canada, or Singapore are not affected by this U.S. law.
It is expected to be collected at the point of remittance—either by financial institutions, money transfer providers, or banks operating in the U.S.
As of now, there is no stated minimum threshold for exemption. Even small remittances may attract the 3.5% tax unless the final Senate version modifies this.
No clarity has been issued yet on deductibility, but since this is an excise tax (not income tax), it is unlikely to be deductible under current IRS rules.
No. This tax is not applicable to Resident Indians who are liquidating their investments abroad (e.g., U.S. stocks or property) and repatriating funds back to India. This proposed tax is levied only on remittances from the U.S. by non-citizens, not on incoming funds into India from Indian residents.
Yes. Even if you’re sending money to your own NRE/NRO account in India, the remittance itself will attract the tax as per the proposed law.
Not yet. The bill has only been passed in the House. It still needs Senate approval, and the final version may include modifications or clarifications.
Broader Impact on India
If enacted, the tax could dampen the flow of remittances by 10–15%, potentially causing a $12–18 billion annual reduction in inflows. This may significantly affect real estate, education, and consumer spending sectors in India, which rely heavily on NRI support.
Conclusion
While the proposed U.S. remittance tax is not yet law, NRIs—especially those in the U.S.—should stay alert, informed, and proactive. Early planning and sound financial advice can help mitigate the impact of this upcoming change.
Disclaimer: This article is for informational purposes only as of 29.05.2025 and does not constitute legal or tax advice. For personalized guidance, consult a licensed tax or financial advisor in the U.S. and India.
New U.S. Remittance Tax Could Cost NRIs 3.5% More
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