US Senate lowers proposed remittance tax to 1%, spares bank transfers

The US Senate has softened its proposed remittance tax, cutting the rate to 1 per cent and sparing most bank account and card transfers — a move that will come as major relief for millions of Non-Resident Indians (NRIs) and other immigrant communities who regularly send money home. The tax would start applying to remittance transfers made after December 31, 2025 as per the proposal. 

 

A new draft of the "One Big Beautiful Bill", released on June 27, shows big changes from the earlier version passed by the House of Representatives. The tax was originally proposed at 5 per cent in the House bill under the Trump administration before being reduced to 3.5 per cent and now further lowered to 1 per cent in the Senate draft.

 

 

But crucially, this tax will only apply to cash or similar physical payments handed over to money transfer providers. Transfers done through bank accounts or debit and credit cards issued in the US won’t be taxed. The bill says the tax is “limited to cash and similar instruments… only to any remittance transfer for which the sender provides cash, a money order, a cashier’s check, or any other similar physical instrument.”

 

And it specifically states the tax will not apply when money comes from “an account held in or by a financial institution” that meets US regulatory standards, or when funded with “a debit card or a credit card which is issued in the United States”.  

 

Lloyd Pinto, Partner – US Tax, Grant Thornton Bharat, said, “Senate republicans released their updated draft of the proposed One Big Beautiful Bill Act on Jun 27 and have a self imposed deadline of July 4 to try to pass this bill.... This should come as a huge relief to the NRI community in the US as they will not be subject to this remittance tax if the remittances are made through accounts held with designated US bank and financial institutions or funded via debit or credit cards issued in the US.”

 

India is the largest recipient of remittances from the United States. In 2023-24, India received $32.9 billion from the US alone, accounting for 27.7 per cent of its total inward remittances, according to Reserve Bank of India data. Overall, India’s remittances have more than doubled over the past decade, growing from $55.6 billion in 2010-11 to $118.7 billion in 2023-24.

 

Earlier, concerns were raised by immigrant communities and policy experts over the House proposals, as the higher tax rates threatened to increase costs for millions of families depending on cross-border money transfers.