US REMITTANCE TAX PROPOSAL: HOW IT COULD IMPACT NRIs

The US House cleared a bill for a new 5% tax on all money sent abroad effective 1 January 2026

- AJAY R. VASWANI

A major tax change could be coming for NRIs in the US. The House Ways and Means Committee has cleared the "One Big Beautiful" Tax Act, which seeks to extend parts of the 2017 Tax Cuts and Jobs Act, and add new measures. One proposal includes a 5% tax on foreign remittances, likely to affect NRIs who send money to India. The bill still needs Senate approval, but Republicans are pushing to finalize it by 4 July. If passed as is, the remittance tax will apply to transfers made after 31 December 2025. Let's break down what this proposed tax means, especially for NRIs on HIB, L1, or F1 visas and Green Card holders.

What is remittance transfer tax? Under proposed Chapter 36C, Section 4475 of the US Internal Revenue Code, a 5% tax would apply to remittances—money sent from the US to other countries, including India. This tax is based on the transfer amount, not income. For example, sending $10,000 to India could attract a $500 tax.

When will this tax apply? If enacted, the remittance transfer tax would apply to all qualifying transfers made on or after 1 January 2026. The accompanying refund and reporting provisions will apply to tax years ending after that date.