US Senate has approved a major amendment to reduce the controversial remittance tax on Non-Resident Indians (NRIs) from 3.5% to just 1%. The move, included in the draft of the One Big Beautiful Bill Act, offers a huge relief for millions of NRIs who send money back home to India every month.
What Exactly Changed
The revised proposal brings the remittance tax down to a flat 1%, compared to the earlier 3.5% rate that sparked strong criticism among the Indian diaspora
Even better, the tax will only apply to remittances sent through non-bank channels. Transfers made via U.S. bank accounts, debit cards, credit cards, and licensed financial institutions remain fully exempt.
Why This Is a Big Deal
According to official estimates, Indians living in the USA send nearly $33 billion every year to their families in India. At a 3.5% tax rate, this could have cost senders over $1.1 billion annually.
By reducing the tax to 1%, the annual burden now drops to around $330 million, saving billions of rupees that families in India can use for education, healthcare, and daily expenses.
When Will This Start
- The new remittance tax will take effect after December 31, 2025.
- This gives NRIs over a year to plan transfers and switch to compliant channels to avoid even the small 1% tax indmoney
Key Highlights at a Glance
| Change | Old Proposal | New Amendment |
|---|---|---|
| Remittance tax rate | 3.5% | 1% |
| Applies to | All remittances | Only non-bank transfers |
| Effective from | 2025 | January 2026 |
| Exempted channels | None | US banks, cards, licensed firms |
How NRIs Can Save Even More
- Use verified U.S. banks or digital apps linked to U.S. bank accounts.
- Avoid unlicensed cash services and small unregistered agents.
- Plan big transfers before December 2025 to fully escape the tax.
Expert View
Finance experts say this change will help:
✅ Keep remittance flows to India stable.
✅ Reduce the risk of informal or illegal channels.
✅ Protect families in India from rising costs.
Bottom Line
The decision by the USA to cut remittance tax for NRIs to 1% is a practical move that balances government revenue needs with the reality of millions of Indian families relying on foreign remittances. While the tax still exists, smart planning and using legal banking channels mean most NRIs can keep sending money home safely and cheaply.
