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3.5% US Remittance Tax: Key Facts for NRIs & Students
A new proposal in the U.S. House of Representatives has been passed which would add taxes on every international money transfer sent by non-citizens. For millions of Indian families who depend on regular support from relatives working in the US, this represents a significant new cost and alter the flow of funds for education, healthcare and daily expenses.
What is the New 3.5% % Remittance Tax in the US
The new U.S. bill states that a 3.5 % tax will be levied on any remittances made by anyone in the US who is not officially recognised as citizens or nationals as proposed under the law. There is no exemption limit for this tax, this would be collected by remittance service providers such as banks and money transfer apps. The amount would be transferred to the US Treasury every quarter.
Who Introduced the Proposal and Why?
The proposal is part of the “One Big Beautiful Bill Act,” which was introduced in the U.S. House of Representatives on May 12, 2025. The bill, part of President Donald Trump’s legislative agenda, was brought forward by the House Ways and Means Committee and approved by the House Budget Committee on May 18, 2025.
The following objectives were the focus of the bill's introduction:
- Increase Revenue for Domestic Initiatives
The government is seeking to raise funds for key domestic priorities, such as strengthening border controls and increasing defence expenditures.
- Immigration Policy Enforcement
The remittance tax is also intended to tighten the immigration policies for non-citizens moving to the U.S. For those already residing in the country, the increased cost of transferring funds to their home country would lead them to reconsider their stay.
Latest Update on the US Remittance Bill
As of 23rd May, 2025 the US House of Representatives passed the US Remittance Bill. The excise tax on remittance transfers has been revised to 3.5% from the proposed 5%. This tax will not apply to US citizens or nationals remitting from the USA to Abroad.
Who could be taxed under this proposal?
The 3.5% on taxation will apply to individuals who are non-US citizens, which are:
- Individuals who hold work visas (H1B, H2A, L1)
- Student Visas (F1)
- Green Card holders awaiting citizenship.
How This Tax Could Impact NRIs Sending Money to India
One of the main sections of individuals impacted by this tax would be NRI residing in the U.S. who transfer money to the USA from India on a regular basis. In the past few years, India has been the largest recipient of remittances from the USA, with an average of more than USD 32 billion sent to India.
If a family sends USD 1,000 each month, a 3.5% tax on the remittance would reduce the net amount received to USD 965. To ensure the recipient still receives the full amount, the sender would need to account for this tax by sending approximately USD 1,036.27 instead.
Also Read:- Foreign Inward Remittance: Process, Charges, and Compliance
What Could Be Potential Economic Impact on India
The new remittance tax will be in effect from January 1st, 2026. A 3.5% per cent international transaction tax on remittance could cost over USD 1 billion each year in foreign exchange inflow, which could also affect the valuation of the Indian Rupee against the US dollar. This could also affect the local spending of Indian citizens as many families rely on this income.
How NRI Can Prepare for the Proposed U.S. Remittance Tax
Since the new remittance tax will come into effect from next year families and NRIs living in the USA can take a few steps to be ready:
- Track Transfers Carefully
Keep detailed records of all remittance transactions when you send money to India from the USA. In terms of the tax filing procedure, this might be useful.
- Review Immigration Status
Confirm the status of your citizenship and visa, this can directly affect your eligibility to be exempted from this tax.
- Stay Updated on Legislation
Check all the latest information regarding the new excise tax on remittance transfers, so that you are well informed and compliant to the requirements.
- Choose the right Remittance service
Make sure that you use a remittance service that is compliant with all the regulations and makes it affordable to send money to India. In this case, the remittance service by DBS Treasures offers the remittance of funds to India at preferable foreign exchange rates with same-day transfer options.
Conclusion
With the new excise tax on remittance transfers implemented in the next year, its potential impact on Indian families and foreign exchange inflows is significant. Keeping yourself informed and planning ahead can help you and your family handle any upcoming changes more effectively.
To transfer money from the USA to India securely, consider using DBS Treasures Remittance services, which offers zero remittance charges on all your transactions, which makes sending money to India affordable and easy.
