The introduction of a 3.5 per cent remittance tax under the proposed “One Big Beautiful Bill” could significantly raise the cost of sending money from the United States to India for Non-Resident Indians (NRIs). This measure will especially affect those who regularly transfer funds for family maintenance, education, property investments, or financial obligations in India. Even modest remittances will now carry an added financial burden, which may prompt many NRIs to rethink the frequency and size of their transfers. From a broader perspective, this tax could also discourage legitimate banking channels and reduce the flow of foreign currency into countries like India, where such remittances form an important part of certain household incomes.
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What To Do
“To deal with this change, NRIs would be well-advised to plan their finances in advance and adopt strategies to reduce the long-term impact. This could include sending larger amounts before the tax takes effect in 2026, consolidating multiple small transfers into fewer transactions, or investing more in assets within the United States to reduce the need for future remittances. Some may also explore options like long-term financial planning through professionals who understand both Indian and U.S. regulations. While this new tax poses practical challenges, careful and lawful planning can help NRIs adapt their cross-border strategies without breaching any rules or compromising financial goals,” says Tushar Kumar, advocate, Supreme Court of India.
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The U.S. government has proposed a 3.5 per cent excise tax on overseas remittances made by individuals. Given that India is the world’s top recipient of remittances, with the United States being the largest source, this proposal has understandably raised concerns about its potential impact on the flow of funds to India. “However, a closer examination reveals that the real impact may be more limited than initially perceived,” says Kumar.
Structuring Salary Payments For Temporary Visa Holders (e.g., H-1B, L-1)
Individuals working in the U.S. on temporary visas, such as H-1B or L-1, may want to explore receiving a portion of their salary in non-U.S. bank accounts, particularly if they maintain ties with entities or employers abroad. “If part of the compensation is directly deposited outside the U.S., it may not legally constitute a U.S.-sourced remittance and could be excluded from the taxable remittance base. This arrangement is especially relevant for individuals working for multinational companies or having contractual ties with overseas entities,” says Ankit Jain, Partner, Ved Jain and Associates.
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Establishing A Foreign Investment Holding Entity
NRIs may consider setting up an offshore legal entity or trust, outside of the U.S., to manage their overseas investments. “Remittances made to fund such an entity may not fall under the 'personal, family, or household' purpose clause and therefore may not attract the 3.5 per cent excise tax. The entity can be used to centralize investment activity in India or other jurisdictions, manage family assets, or participate in global opportunities,” says Jain.
