US Lowers Remittance Tax: NRIs To Bear 3.5% Tax Instead Of 5% Under Trump's One Big, Beautiful Act

Indian expats in the United States just got a small but significant break. In a revised move under former President Donald Trump’s “One Big, Beautiful Bill Act,” the controversial 5 per cent tax proposed on money sent abroad has been trimmed to 3.5 per cent. While that may not sound like a huge change on paper, for many NRIs, especially students and workers supporting families back home, it could mean real, immediate relief.

To put it in perspective: A $10,000 remittance to India would now attract a tax of $350 instead of $500. That’s a $150 difference, nearly Rs 12,000 in savings per transaction.

The Numbers Behind the Nudge

The rollback follows mounting concerns among the Indian diaspora after the 5 per cent proposal sparked widespread anxiety. India, after all, is the largest recipient of global remittances.

According to 2024 World Bank data, the country received $129 billion in remittances last year, with nearly a third, about 28 per cent, coming from the US alone.

Had the original plan gone through, the Global Trade Research Initiative (GTRI) had warned that India could face a 10–15 per cent dip in remittances. That’s a shortfall of $12–18 billion annually, a serious dent in household budgets back home and a ripple effect on everything from education payments to medical expenses.

But while the lighter 3.5 per cent tax feels like a win, the policy is not without thorns.

How Are Things More Stringent Now

Alongside the reduced tax, the bill also tightens its grip on compliance. Money transfer companies will now be required to report any individual sending over $5,000 in a single day.

That means routine remittances, especially for tuition or property transactions, will draw more scrutiny.

Additionally, Know Your Customer (KYC) norms have been ramped up, and more frequent compliance filings are expected. Transfers may take longer, and users might be asked for extra documentation, something that could add friction for students and working professionals already juggling financial and immigration rules.

For parents waiting on tuition payments or those trying to send money urgently for a family emergency, this delay could turn into more than just an inconvenience.

What Does It Mean For Students

For Indian students studying in the US, the earlier five per cent proposal had already triggered an alarm. Many students start supporting their families or paying off education loans soon after taking up part-time or full-time work.

Even modest increases in costs, like this tax, can throw off budgeting and delay financial milestones.

There is also a murkier side. Tighter regulation and tracking may push some remitters toward informal or illegal routes such as hawala, which continue to operate despite the risk. But with declining cost advantages and rising enforcement, it remains unclear whether these channels will remain viable for long.

How Can You Plan For This

One important question to ponder is: Can NRIs reduce the burden of this tax legally?

“Not really,” says CA Ashish Niraj, Partner, A S N & Company, Chartered Accountants. “US laws are designed to be watertight, leaving very little room for tax planning. The bill offers no exemption even for purpose-based remittances.”

However, Niraj points out a few workarounds. For example, many NRIs already use US-based credit cards to pay for expenses directly in India, groceries, clothes, and even jewellery. “If there’s no additional fee for card usage, this could be a practical option for some. Credit card payments for online purchases by dependents in India can bypass remittance taxes altogether,” he says.

Another strategy? Timing. Since the bill has not been enacted yet and could take around a month to go into effect, NRIs planning large transfers, for property purchases or market investments, could consider making those transfers immediately to avoid the upcoming tax altogether.

What Is Next

For now, Indian BRIs are in a wait-and-watch mode. The tax is lower, yes, but the road ahead is far from smooth. The broader bill includes other sweeping changes related to immigration and trade, and its ripple effects may yet be felt.

Until the law is fully in place, NRIs have a small window to plan, be it to fast-track big-ticket remittances or reassess how they support their families back home.