US To India Remittances May Become More Expensive By 2026

Remitting money from the US to India may get pricier in 2026 if a recently tabled bill becomes an act. The 'One Big Beautiful Bill,' a 1,116-page bill incorporating sweeping tax reforms and budget reductions, has already been approved by the US House of Representatives. It now goes before the Senate, where a vote is anticipated in late June or early July. It will become an act if it passes.

Among the bill's major proposals is a 3 point 5 per cent tax on remittances made by foreign citizens to foreign nations. The earlier rate suggested was 5 per cent, which was cut before the bill was passed in the House on 22 May.

The new tax has the potential to hit hard at the Indian immigrant community which constitutes one of the largest immigrant communities in the US. As cited by the Migration Policy Institute, more than 2 point 9 million Indian immigrants resided in the US in 2023. The US is the second most sought-after destination for Indians overseas, coming only after the United Arab Emirates. Indians are also the second-largest community of foreign-born individuals in the US, following Mexicans. They account for approximately 6 per cent of the nation's 47 point 8 million foreign-born inhabitants.

Only Non-Citizens to Pay

The remittance tax would exclude US citizens. The bill explicitly mentions that only non-citizens—green card holders, holders of H-1B or other work visas, and foreign students who are earning income—would have to pay the tax when they remit money overseas. US citizens, when taxed at the point of remittance, can have a refund or credit when filing their income taxes, provided they utilise an authenticated remittance service.

For others, like Indians employed in the US on work visas or green card holders, this refund provision will not be operative. Even foreign students who earn money by working as interns or part-timers and then remit this money to India after graduation will have to pay the tax.

Likely Impact on Remittances to India

This action may influence the overall money inflow to India from the US, particularly for frequent senders. According to the Reserve Bank of India, the US was the source of 27 point 7 per cent of all remittances to India in 2023-24. That is about 32 billion US dollars. This percentage has increased from 22 point 9 per cent in 2016-17, reflecting how important the US has become in terms of inflow of money into India.

For most Indians in the US, money remitting back to their own country is a regular and crucial task—be it for family maintenance, medical treatment, education costs, or investments. The 3 point 5 per cent tax implies that with every 1,000 dollars remitted, 35 dollars would be subtracted. In the long run, this would translate into quite a sizeable sum, particularly for individuals making regular or bulk transfers.

Investments and Corporate Transfers Could Be Impacted

The tax could also have implications for the way Indian expatriates make investments in India. One probable effect is on non-resident external (NRE) accounts, under which NRIs can keep and invest funds in India using Indian rupees. Reduced remittance flow might reduce deposits in such accounts.

Over the past few years, India's luxury real estate sector has witnessed growing interest from Indians abroad. The tax could make investments in such sectors unappealing. Indian and multinational mobility schemes that send workers to the US could also be impacted, as the tax would discourage workers from repatriating funds.

What Can NRIs Do

It seems that not much can be done now by individuals to escape the effect except to cut back on how much they send or how frequently. As the tax is yet a proposal and not a law, there remains some time before it is implemented—perhaps in 2026 if approved by the Senate.

Until then, it is recommended to observe how the Senate treats the bill and schedule remittances in advance accordingly. For now, however, NRIs should be aware and prepare for somewhat higher transfer fees in the next few years.