Big remittance cheer for NRIs! US Senate draft of Donald Trump's ‘One Big Beautiful Bill' reduces remittance tax to 1% from 3.5%; details here
United States contributed approximately $32 billion in remittances to India in 2023-24. (AI image)
US remittance tax relief on the cards! Non-Resident Indians or NRIs have reason to breathe a sigh of relief as the final draft of the 'One Big Beautiful Bill Act' proposes just 1% tax on remittances, as against 3.5% earlier.
Originally, the bill sought a 5% remittance tax but the final House version lowered it to 3.5%. However, the US Senate draft has lowered it further.
The introduction of the 'One Big Beautiful Bill Act' had initially created anxiety amongst the US-based Indian community regarding its potential effects on money transfers to India.
The United States hosts approximately 2.9 million Indians as of 2023, making them the second-largest foreign-born population, according to the Migration Policy Institute.
Remittance Tax Relief
The tax imposed shall apply only to any remittance transfer for which the sender provides cash, a money order, a cashier's check, or any other similar physical instrument.
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The updated US Senate draft released yesterday also provides exemptions for transfers from bank accounts and other financial institutions, whilst also excluding transactions made through US-issued debit and credit cards, according to an ET report.
Consequently, routine remittance transactions are likely to be exempt from this new taxation structure. According to the Senate's proposal, the remittance tax will only be implemented on qualifying transfers conducted after December 31, 2025.
US Biggest Source Of Remittances For India
International remittances serve as a vital economic lifeline, particularly for developing economies. Countries such as India derive significant benefits from these overseas transfers, with numerous rural communities relying heavily on such foreign income.
According to RBI's latest survey in March, the United States contributed approximately $32 billion, representing 28 per cent of India's total remittance receipts of $118.7 billion in 2023-24.
The Reserve Bank's March study highlighted an increasing trend of qualified professionals moving to developed countries, with the United States accounting for 27.7% of remittances. Advanced economies contributed over 50% of total remittances in fiscal year 2023-24, signalling evolving migration trends.
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The United States has become the primary source, increasing its share to 27.7% in FY24 from 23.4% in 2020-21. The report stated that "the share of the UK has also increased to 10.8% in 2023-24 from 6.8% in 2020-21, which may be attributed to the 'Migration and Mobility Partnership' (2021) between India and the UK."
This new regulation would impact several categories of Indian nationals residing in the US, including H-1B professionals, L-1 visa holders (intra-company transferees), and permanent residents.
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