'Keep more of what you earn': CA decodes Trump’s One Big Beautiful Bill slashing remittance tax to 1%

The revised draft of the One Big Beautiful Bill Act (OBBBA) provides a significant benefit to Indian professionals in the US and non-resident Indians (NRIs) sending money to India. The updated version of the bill has lowered the tax rate on remittances to just 1%, a substantial decrease from the originally proposed 5%.

This legislative move, which recently cleared a key hurdle in the U.S. Senate, comes as a relief to the large Indian diaspora concerned about rising costs of transferring funds home. The initial 5% levy had sparked widespread anxiety among NRIs, many of whom regularly remit money to support families, pay for education, healthcare, or invest in property in India.

“This is a welcome change that significantly reduces the financial burden on NRIs,” said CA Disha Sehgal, an expert in NRI taxation and cross-border financial planning. “At 5%, the tax could have meant thousands of dollars in additional costs for many Indian families.”

The tax, as defined in the updated draft, will now be imposed at 1% on remittance transfers made using cash, money orders, or cashier’s checks. The bill clearly states: “There is hereby imposed on any remittance transfer a tax equal to 1% of the amount of such transfer.” It further clarifies that, “The tax imposed by this section with respect to any remittance transfer shall be paid by the sender with respect to such transfer.”

However, the bill offers significant relief for the most common remittance methods used by NRIs. Transfers sent directly from “an account held in or by a financial institution” and those funded through debit or credit cards issued in the United States are exempt from this tax.

“This exemption is crucial because it means most NRIs who send money through banks or electronic channels won’t face the new levy,” Sehgal explained. “It protects the most widely used and secure remittance pathways, ensuring minimal disruption for everyday financial transactions.”

Tax Rate

The remittance tax has undergone significant revisions since the OBBBA was first introduced. Initially proposed at 5% in May, it was reduced to 3.5% in the House version of the bill amid pushback from immigrant communities and businesses. The latest Senate draft brings the rate further down to 1%, reflecting a significant policy shift in response to public concern.

“Legislators clearly recognised the potential economic consequences of a high remittance tax, especially for countries like India, where remittances form a major part of household incomes,” said Sehgal.

Remittances and foreign earnings

A reported by The Times of India, citing figures from the Migration Policy Institute, stated around 2.9 million Indians were residing in the United States in 2023, making them the country’s second-largest immigrant community.

Meanwhile, 2024 data from the World Bank shows that India topped the global charts for remittance inflows, receiving $129 billion—far ahead of Mexico’s $68 billion. Notably, in 2023-24, nearly 28% of all remittances sent to India came from the U.S.

During this period, India accounted for 14.3% of worldwide remittance flows—the highest proportion held by any single country since the early 2000s.

For states such as Kerala, Uttar Pradesh, and Bihar, remittances continue to serve as a vital economic support system for countless families.

Under the amended bill, the remittance excise tax would apply solely to non-citizens—including skilled professionals, students, and green card holders. Even income from part-time jobs or internships undertaken by students could be taxed if transferred to India after graduation.

This proposed tax risks dampening the motivation to send funds back home.

It could also influence deposits into Non-Resident External (NRE) accounts, investments in Indian real estate, and corporate relocation programs, especially for employees earning U.S. salaries or stock-based compensation.

Planning ahead

If enacted, the new remittance tax will take effect from January 1, 2026, giving NRIs time to adjust their financial plans.

“NRIs considering large remittances—for buying property, investments, or substantial NRE/NRO account deposits—might want to complete those transactions before December 31, 2025,” Sehgal advised.

The US remains one of the biggest sources of remittances to India, accounting for over $32 billion, roughly 28% of India’s total remittance inflows in FY24. A lower tax rate ensures that more of this vital financial lifeline reaches families and communities in India.

As the bill heads toward potential final approval around the Senate’s self-imposed July 4 deadline, Sehgal urges NRIs to stay informed and proactive. “This bill highlights how important it is for NRIs to keep track of changing regulations,” she said. “It’s about protecting your earnings and making informed decisions.”