In a major shift, the U.S. Senate has proposed cutting the controversial remittance tax to just 1%. This marks a major relief for Non-Resident Indians (NRIs), who had raised serious concerns over the earlier, much higher rate.
Everyday Transfers Now Exempt
Transfers made using U.S.-based bank accounts, debit cards, or credit cards will now escape the new tax. This change protects common personal and family-related transactions—such as monthly support to loved ones in India—from additional costs.
New Tax Starts in 2026
The updated rule will kick in after December 31, 2025. Until then, no remittance tax will apply. The excise tax specifically targets non-citizens, including international students, green card holders, and foreign professionals in the U.S.
Background: From 5% to 1% After Pushback
Originally, the bill aimed to introduce a 5% tax on foreign transfers. Strong backlash from the Indian diaspora helped push that number down. First, lawmakers trimmed it to 3.5%, but now the Senate version proposes a much lower 1% rate.
Impact on Larger Financial Moves
While routine transfers are safe, bigger transactions might still feel the pinch. Transfers to NRE accounts, property purchases abroad, and funds moved by companies for employee relocation could attract the 1% tax if not made through exempt methods. Post-graduation income sent home by students may also be taxed.
Unanswered Questions Remain
Though the rate cut is a welcome change, many NRIs are asking for more clarity. They want to know exactly which transactions count, and if more exemptions might be added before the law is finalized.
What You Should Do Now
If you regularly send money to India, there’s no immediate need to worry. The tax won’t apply this year. But it’s smart to stay informed and plan future transfers carefully—especially large ones—once the new rules take effect.
The reduced remittance tax offers relief, but details still matter. Watch how the final bill shapes up. NRIs may benefit from consulting financial experts to navigate the coming changes smoothly.
