In a significant fiscal move, the U.S. Congress has passed former President Donald Trump’s “One Big Beautiful Bill,” introducing a 1% excise tax on certain international remittances. Effective January 1, 2026, the new levy applies to remittances made via cash, money orders, or cashier’s cheques, with U.S. citizens exempt. The policy specifically targets transfers made by non-citizens, including green card holders and temporary visa holders, such as those on H-1B and H-2A visas.
India, the world’s leading recipient of foreign remittances, is expected to be among the hardest hit, along with other top recipient countries like Mexico, China, the Philippines, Pakistan, France, and Bangladesh.
“This measure is part of broader U.S. fiscal reforms aimed at curbing informal money flows and increasing revenue collection,” explained Dinkar Sharma, Company Secretary and Partner at Jotwani Associates. “It specifically targets cash-based remittance methods and is intended to bring more transparency and traceability to cross-border transfers.”
What Remains Unchanged
Sharma clarified that the new excise tax does not affect the existing U.S. taxation regime for income generated abroad. “NRIs are still required to report global income—including rental income and capital gains from Indian properties—under U.S. tax laws and the India–U.S. Double Taxation Avoidance Agreement (DTAA),” he noted.
Timing Is Crucial
Indian expats considering large remittances are advised to act before December 31, 2025. Transfers completed before the cutoff date will not be subject to the new tax.
“For instance, a $100,000 remittance in 2026 via a non-exempt method could attract a $1,000 tax,” Sharma pointed out. “But beyond the tax itself, the greater concern is compliance. These transactions will require detailed documentation and may trigger additional reporting obligations under U.S. laws such as FATCA, as well as under Indian regulations.”
Choosing the Right Channel
Notably, transfers through regulated U.S. banks, credit unions, or via U.S.-issued debit and credit cards are exempt from the new tax. However, Sharma cautioned against assuming all digital transfers qualify for exemption. “Some fintech platforms use hybrid systems—such as virtual wallets—that may not fall under exempt categories. Verifying the exact mechanism and maintaining proof is essential to avoid unintended taxation.”
Strategic Action for NRIs
“NRIs should take a proactive approach,” Sharma advised. “This isn’t merely about avoiding a 1% tax—it’s about steering clear of complex and burdensome compliance issues. Consulting with both U.S. and Indian tax advisors is highly recommended, especially for high-value transfers.”
As the January 2026 implementation date approaches, Indian expats are encouraged to evaluate their remittance plans, optimize transfer timing, and ensure their channels meet regulatory standards—steps that could help safeguard both their finances and their compliance standing.
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