As US Senate Cuts Remittance Tax to 1%, ‘Most NRIs Won’t Pay This Tax At All’, Says Expert

After weeks of back-and-forth in the US Congress, the remittance tax under former President Donald Trump’s controversial ‘One Big Beautiful Bill Act’ (OBBBA) has now been slashed to 1 per cent. This is a sharp cut from the original 5 per cent tax proposal which had sparked panic among non-resident Indians (NRIs), especially professionals and students working in the US.

However here is the twist: even that 1 per cent tax may not affect most NRIs at all.

A Tax That Doesn’t Touch Digital Transfers

“The biggest misconception is that every dollar sent to India will be taxed,” said Alok Dubey, a certified financial planner in a LinkedIn post. Dubey advises several Indian clients in the US. He added that, “most people are missing the nuance here.”

According to Dubey, nuance lies in how the tax is applied. The 1 per cent levy, as outlined in the updated Senate draft of the OBBBA, is restricted to remittance transfers made via cash, money orders, or cashier’s checks. In other words, it targets walk-in remittance centres or offline methods, forms of money transfer that are increasingly outdated, particularly among urban, tech-savvy NRIs.

On the other hand, if you are using digital platforms or financial institutions based in the US, say, routing funds through your US bank account or sending money using apps like Wise, Xoom, or Remitly, you are in the clear. These digital channels are explicitly exempted under the revised bill, Dubey highlighted in his post.

From 5% Panic to 1% Practicality

The proposal has seen multiple revisions in recent months. When first introduced in the House in May 2025, the bill proposed a steep 5 per cent tax on international remittances. That would have meant a $500 fee on a $10,000 remittance, no small amount when you are simply sending money home for your parents' medical bills or college fees.

After much criticism, a House revision brought it down to 3.5 per cent. And now, with the Senate’s version proposing just 1 per cent, the fear among NRIs has somewhat subsided.

However, those who still rely on physical remittance methods, especially older immigrants or people without US bank accounts, might find the 1 per cent tax to sting a little. As Dubey pointed out in his post, “Rs 42,000 gone just for sending money back home? That’s what many feared at 5 per cent. At 1 per cent, it’s manageable, but avoidable.”

For instance, a $10,000 remittance to India would now attract a tax of $100 under the 1 per cent rate, compared to $500 under the initially proposed 5 per cent. That’s a $400 difference in savings per transaction for NRIs.

Why This Matters for India

According to the World Bank, India received $129 billion in remittances in 2024, the highest in the world. Of this, about 28 per cent came from the US alone. For many Indian households, especially in states like Kerala, Uttar Pradesh, and Bihar, remittances could be a much -needed financial anchor.

“If a broad-based tax had come into effect, it could’ve slowed down inflows through formal channels and pushed some people toward informal methods or black-market exchanges,” Dubey noted.

Fortunately, digital remittance apps, which could be a norm for most NRIs, will remain untouched. That means regular investments into Indian mutual funds, property purchases, and family support will likely continue without disruption.

What’s Next?

The bill, which includes sweeping proposals from border wall funding to military spending, passed a narrow 51-49 vote in the Senate and is expected to move to full Congressional debate. Trump has reportedly urged lawmakers to clear it before July 4.

However the remittance clause, though tucked inside a far broader political document, has drawn attention for its potential ripple effects beyond the US. For now, it appears Indian-origin professionals and students sending money through mainstream digital platforms have little to worry about.