In a significant relief for Non-Resident Indians (NRIs) residing in the United States, the US Senate has released a draft version of the “One Big Beautiful Bill” that proposes to reduce the remittance tax on goods sent to India from 5% to 1%. This development comes after months of concern among the Indian diaspora over the financial impact of the initially proposed tax.
The draft bill specifies that the 1% remittance tax will apply only to certain modes of transfer, such as cash payments, money orders, and cashier’s cheques. Importantly, transactions conducted via US-issued debit and credit cards, as well as bank account transfers, will be exempt from the tax. This selective taxation approach aims to reduce the financial burden on NRIs while ensuring compliance and traceability.
The proposed remittance tax will be implemented only on qualifying transactions made after December 31, 2025. The move to lower the tax from 5% to 1% comes after intense discussions and amendments in both chambers of Congress. Initially passed by the House of Representatives at 3.5%, the Senate further reduced the rate to 1% before approving the bill with a narrow 51-49 vote. Notably, two Republican senators voted against the bill, reflecting some bipartisan disagreements within the ruling party.
Earlier versions of the bill had sparked widespread anxiety among Indian-origin residents, particularly H1B visa holders and Green Card holders, who were expected to bear an estimated annual tax burden of USD 1.6 billion. American citizens were excluded from the tax requirement, further fueling the concerns.
The broader bill, which also includes controversial provisions on medical aid reductions and food assistance cuts, continues to face political scrutiny despite its narrow passage. However, the remittance tax adjustment is being viewed as a balanced step to address diaspora concerns without compromising legislative goals.
This development marks a significant milestone for the Indian-American community and provides clarity on the future of cross-border remittances between the US and India.
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