New US remittance tax proposal: What it means for NRIs sending money to India
A significant tax development is on the horizon for non-resident Indians in the US. The US government's House Ways and Means Committee has advanced a sweeping bill titled the 'One Big Beautiful" Tax Act, aimed at extending several provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introducing new tax measures.
Among these proposals is the introduction of a 5% tax on remittances sent abroad, a measure that could directly impact thousands of NRIs who regularly transfer funds to their families in India.
While the bill is subject to a Senate review and further debate, a majority of US Republican Party leaders aim to finalize it by 4 July. If passed in its current form, the remittance transfer tax will take effect on transfers made after 31 December 2025.
Let's break down what this proposed tax means, especially for NRIs on H1B, L1, or F1 visas and Green Card holders.
What is remittance transfer tax?
Under the proposed Chapter 36C, Section 4475 of the US's Internal Revenue Code, a 5% tax will be levied on remittance transfers—that is, money sent by individuals from the US to recipients in other countries, including India.
This tax is not based on income but on the amount being transferred abroad. For example, if you send $10,000 to India, you could be required to pay an additional $500 in tax.
When will this tax apply?
If enacted, the remittance transfer tax would apply to all qualifying transfers made on or after 1 January 2026. The accompanying refund and reporting provisions will apply to tax years ending after that date.
Also read | How the India-UK Double Contribution Convention benefits employers and employees
Who will be affected?
This tax primarily affects non-citizen residents in the US, including NRIs on H1B, L1, or F1 visas, Green Card holders, and any individual who is not a verified US citizen or national. If you fall into any of these categories and send money to India, you could soon be required to pay this new tax.
The proposed legislation provides a narrow exemption for verified US citizens and nationals and transfers made through 'qualified remittance providers" who have agreements with the US's Internal Revenue Service department to verify a sender's citizenship status.
If a US citizen ends up paying the tax, they can claim a refundable tax credit, but only if they provide a valid social security number and supporting documentation.
How will the tax be collected?
The tax is collected at the point of transfer by the remittance provider, such as as bank or a money transfer service. The service provider will collect the 5% tax from the sender and deposit the tax with the US treasury department on a quarterly basis.
If a provider fails to collect the tax at the time of transfer, they will become liable for the payment instead.
Also read | ITR filing: Why you shouldn't rush to file taxes as soon as the portal opens
Anti-abuse provisions
To prevent circumvention of the remittance transfer tax, the proposal includes anti-conduit and anti-abuse rules. This means any indirect or creative structure used to avoid paying the remittance tax—such as funnelling money through third parties or shell accounts—could trigger enforcement actions and penalties.
Let's say you are an H1B visa holder in the US and you send $20,000 to your parents in India in February 2026. Under the proposed law:
This is over and above any other fees or charges that may already apply to international remittances.
Also read | BluSmart lessons: Investors must look beyond high-growth stories
What should NRIs start preparing for?
Here are a few practical steps NRIs can consider:
Final thoughts
While this tax is not yet law, it represents a significant shift in US tax policy on foreign remittances. If passed, it will increase the cost of sending money abroad for a large segment of the NRI community, particularly those who are not US citizens.
NRIs in the US should closely monitor legislative developments and consider speaking with a cross-border tax specialist to understand the full implications. What begins as a small percentage today can lead to a meaningful cumulative impact over time, especially for those with ongoing financial obligations in India.
Ajay R. Vaswani is the founder of ARAS and Company, Chartered Accountants. This article is intended for general informational purposes only and does not constitute legal or tax advice. Please consult a licenced professional.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
an hour ago
- Time of India
Why Indians are turning to EB-5 Visa for the US: What it is and who is eligible
As the Trump administration tightens limitations on student visas, more Indian professionals and students are considering the EB-5 visa as a different route to permanent residency in the United States. The EB-5 Immigrant Investor Program was created in 1990 and permits foreigners to get a Green Card by investing in US businesses that create jobs. A minimum investment of $800,000 (about INR 7 crore) in a qualifying US business is required for the EB-5 visa, especially in Targeted Employment Areas (TEAs) that are rural or have high unemployment rates. The investment should at least create ten full-time employment for American workers. Applicants have the option of investing directly or through regional centres authorised by USCIS that oversee economic development projects. Read more: World's 10 tallest waterfalls that will take your breath away The tightening of US immigration policies has led to a significant surge in EB-5 visa applications from Indian nationals. Immigration lawyers report a 100% increase in applications from Indian students over the past few months. This uptick is largely driven by concerns over the stability of student visas and the desire for a more secure and direct route to permanent residency. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Soluções de energia de confiança para Data Centers de IA Siemens Energy Learn More Undo Investors can include their spouse and unmarried children under 21 in their application, in addition to the EB-5 visa offering a route to a Green Card. This option makes it an appealing option for families seeking long-term stability in the United States. Nonetheless, there are certain challenges associated with the program. According to reports, India gets roughly 700 EB-5 visas annually, which might lead to backlogs and lengthy application wait times. Due of the high cost demand, high-net-worth individuals are likewise limited in their access. Reports add that the Trump administration has responded to these restrictions by proposing a new "Gold Card" immigration program that would do away with the job creation requirement in exchange for a $5 million investment. This program aims to attract more affluent investors, but it has not yet received congressional approval and is uncertain legally. Read more: Schengen Visa for Indian passport holders: Application, cost, timeline & tips Despite these modifications, Indian people who wish to settle permanently in the US should still consider the EB-5 visa, especially in light of the nation's current immigration regulations and political climate. As the situation continues to evolve, potential applicants are encouraged to consult with immigration specialists to manage the complexities of the EB-5 program and determine the best paths to achieving their residency goals. One step to a healthier you—join Times Health+ Yoga and feel the change
Mint
5 hours ago
- Mint
Rupee supported at open by dollar dip on US tariffs, fiscal concerns
MUMBAI, June 2 (Reuters) - The Indian rupee is expected to be supported at the open on Monday following a decline in the U.S. dollar due to tariff-related developments and fiscal concerns. The 1-month non-deliverable forward indicated an open in the 85.52-85.54 range, versus 85.5775 in the previous session. The dollar index slipped 0.2% while Asian currencies were mixed on the day. "Not much on the Asian front to guide the rupee today, with two-way flows likely to dominate in the 85.50–85.70 band," a currency trader at a Mumbai-based bank said. According to the trader, interbank players are looking to sell dollar/rupee on up ticks, with stops placed around the 86 mark. In recent sessions, the rupee has found support in the 85.60–85.70 zone, with bankers noting broad-based interest in selling dollars at those levels. The dollar kicked off the week on the defensive against its major peers, weighed down by ongoing uncertainty over U.S. tariffs. President Donald Trump announced late Friday his intention to double duties on imported steel and aluminium to 50%, effective Wednesday. This follows a U.S. trade court that initially blocked much of Trump's tariff plan, ruling that he had overstepped his authority. However, an appeals court later reinstated the bulk of those duties, reigniting market caution. The dollar has further been weighed down by fiscal worries in recent weeks. The U.S. Senate will consider Trump's sweeping tax cut and spending bill, which will add an estimated $3.8 trillion to the $36.2 trillion in debt over the next decade. "US growth and interest rates should continue to converge lower than in many other major economies", which should keep the dollar under pressure, ING Bank said. "And there's still a sizeable risk that fiscal credibility issues take their toll on US assets this summer." ** One-month non-deliverable rupee forward at 85.64; onshore one-month forward premium at 13.25 paisa ** Dollar index down at 99.2 ** Brent crude futures up 2.7% at $64.5 per barrel ** Ten-year U.S. note yield at 4.41% ** As per NSDL data, foreign investors sold a net $205.6mln worth of Indian shares on May 29 ** NSDL data shows foreign investors bought a net $3,412.8mln worth of Indian bonds on May 29 (Reporting by Nimesh Vora; Editing by Eileen Soreng)
NDTV
5 hours ago
- NDTV
Many Injured After Man Throws Fire Bomb, Shouts 'Free Palestine' In US
Washington: Police said a male suspect was taken into custody on Sunday after an attack that left multiple people with burns in Boulder, Colorado, in what the FBI director described as a "targeted" act of terror. FBI Assistant Director for Public Affairs Ben Williamson said on X, a social media site, that the suspect "shouted 'Free Palestine' while throwing fire bombs at a crowd of Jewish people." FBI Director Kash Patel described the incident as a "targeted terror attack," and Colorado Attorney General Phil Weiser said it appeared to be "a hate crime given the group that was targeted." The FBI has identified the suspect as 45-year-old Mohamed Sabry Solima. But Boulder Police Chief Stephen Redfearn said earlier in the day that information on the attack, which occurred near a demonstration to remember the Israeli hostages who remain in Gaza, was "very preliminary." "This was a beautiful Sunday afternoon in downtown Boulder on Pearl Street and this act was unacceptable," he said. "I ask that you join me in thinking about the victims, the families of those victims, and everyone involved in this tragedy." Pro-Hamas supporters should be categorized as domestic terrorists!! — Jammles (@jammles9) June 1, 2025 The incident comes amid heightened tensions in the United States over Israel's war in Gaza, which has spurred both an increase in antisemitic hate crime as well as moves by conservative supporters of Israel led by President Donald Trump to brand pro-Palestinian protests as antisemitic. His administration has detained protesters of the war without charge and cut off funding to elite US universities that have permitted such demonstrations. Brooke Coffman, a 19-year-old at the University of Colorado who witnessed the Boulder incident, said she saw four women lying or sitting on the ground with burns on their legs. One of them appeared to have been badly burned on most of her body and had been wrapped in a flag by someone, she said. She described seeing a man whom she presumed to be the attacker standing in the courtyard shirtless, holding a glass bottle of clear liquid and shouting. "Everybody is yelling, 'get water, get water,'" Coffman said. Senate Minority Leader Chuck Schumer, a prominent Jewish Democrat, said he was closely monitoring the situation. "This is horrifying, and this cannot continue. We must stand up to antisemitism." The attack follows last month's arrest of a Chicago-born man in the fatal shooting of two Israeli embassy employees in Washington, DC Someone opened fire on a group of people leaving an event hosted by the American Jewish Committee, an advocacy group that fights antisemitism and supports Israel. The shooting fueled polarisation in the United States over the war in Gaza between supporters of Israel and pro-Palestinian demonstrators. Colorado Governor Jared Polis posted on social media that it was "unfathomable that the Jewish community is facing another terror attack here in Boulder." Redfearn said he was not able to identify the suspect yet, noting that he had been taken to hospital. He added there were multiple injuries among the victims, ranging "from very serious to more minor." (Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
