NRIs get major remittance tax relief on money transfers from US to India

Bank transfers, payments via financial institutions, and transactions using US-issued debit or credit cards will be exempt from this tax.

Image Credit : Google

Tax on sending money from America to India

Sending money from the US to India is about to get easier and cheaper. The US Senate has amended the proposed tax rates under a major bill. This provides great relief to Non-Resident Indians (NRIs). 

The initially proposed 3.5% remittance tax has now been reduced to 1% in the latest draft. Initially, the bill proposed a 5% tax, but after several amendments, the final version has significantly reduced it, benefiting NRIs and foreign workers.

Image Credit : Google

How much tax will be levied?

According to a report by the Economic Times (ET), this tax will not apply to every type of transfer. The rule clearly states that bank transfers, payments through financial institutions, and transactions using US-issued debit or credit cards will be exempt from this tax. 

The 1% tax will only apply to certain types of remittances that do not go through official banking channels. These changes are expected to take effect from December 31, 2025, giving NRIs sufficient time to plan and adjust their financial transactions.

Image Credit : Google

Indians living in America

The initial announcement of the remittance tax caused concern among the more than 2.9 million Indians living in the US, many of whom regularly send money home for family support, property investments, or savings. 

According to the Reserve Bank of India (RBI), Indians living in the US remitted approximately $2 billion to India in 2024, which is almost 27.7% of India's total remittances. A higher tax could have severely impacted this flow, but the recent 1% reduction provides much-needed relief.

Image Credit : Google

Who will be affected by the tax?

Even though the tax has been reduced, it still applies to certain groups. This includes highly skilled workers such as non-citizens, students, and green card holders in the US. For example, if a student working part-time or undergoing training sends money to India after graduation, that amount may be subject to tax.

Similarly, funds transferred for purposes such as NRE deposits, real estate purchases, or corporate mobility programs may fall under this taxation rule if they do not utilize the exempted channels.

Image Credit : Google

What's next for NRIs?

With the tax now set at 1% instead of 3.5%, the cost of sending money to India has decreased, providing relief to most NRIs. However, some may reconsider large transfers for investments or property purchases. 

The good news is that regular family support payments made through banks or cards will not be taxed, safeguarding everyday remittances. Since the tax only takes effect from December 31, 2025, NRIs have ample time to plan and manage their future financial transactions wisely.