In a major update for the Indian diaspora, former US President Donald Trump has rolled out the One Big, Beautiful Bill—a broad legislative package targeting trade, immigration, and global money transfers. One of its headline provisions is a 3.5% excise tax on foreign remittances by non-citizens, including green card holders and H1B visa holders. This new proposal replaces the earlier 5% remittance tax suggestion, offering a marginal relief but still signaling significant implications for Non-Resident Indians (NRIs) sending money to India.

What Is the 3.5% Remittance Tax for NRIs in the US?

As per the proposed law, non-US citizens (green card holders, H1B/L1 visa holders, students, etc.) will be subject to a 3.5% tax on any money remitted abroad. This tax applies to money sent from the USA to India or any other country, and is referred to as an excise tax on remittances.

US citizens and nationals are exempt and can potentially claim a refund or credit during tax filing—if using certified remittance providers.

This updated rate is a rollback from the earlier proposed 5% remittance tax, but the cost impact remains significant for frequent senders.

Why This Tax Matters to NRIs: Key Impact for Indian Remittances

India received approximately $129 billion in inward remittances in 2024, of which $32 billion (28%) came from the US alone. That makes the US a critical remittance source country for India.

According to the Migration Policy Institute, there are around 2.9 million Indian immigrants in the US. A large percentage of them regularly send money to India to support families, pay tuition, or invest.

With the proposed 3.5% remittance tax:

• Sending $10,000 will cost $350 in tax (down from $500 in the earlier proposal).
• A potential drop of 10–15% in remittance volume could translate to a $12–18 billion loss in India’s annual remittance inflows (GTRI estimates).

Who Will Be Impacted by the New NRI Remittance Tax?

• Indian professionals on H1B, L1, and other work visas: Will face the direct impact.
• Green card holders: Though permanent residents, they’re not exempt.
• Indian students in the US: May face complications due to increased KYC and documentation.
• Families in India: Might receive lower net amounts due to higher transfer costs.

New Compliance Rules for Sending Money to India from the USA

The proposal also mandates increased compliance and monitoring:

• Transactions over $5,000/day must be reported by remittance providers.
• Stricter KYC and identity verification requirements for senders.
• Possible temporary increase in informal transfers or hawala routes, though digital tracking may deter such practices.

NRI Tax Planning Tips: How to Lower Impact of 3.5% Remittance Tax

• Consolidate Transfers: Send larger sums less frequently to reduce cumulative tax.
• Use Certified Transfer Channels: Ensure you’re using government-approved services to stay eligible for credits/refunds (if applicable).
• Tax Advisory Support: Speak to a US or India-based tax advisor who understands cross-border tax laws, FATCA, and DTAA.

Effect on NRI Investments in India: Real Estate, NRE Accounts, Stocks

This tax may discourage NRIs from investing in India due to reduced remittance flows and added tax complexity.

Premium real estate, Indian stock markets, and NRE fixed deposits—which typically benefit from NRI inflows—may see a slowdown in demand.

Experts suggest that some NRIs may shift their investment focus to US-based assets to avoid the new remittance levy and avoid complex refund mechanisms.

Final Thoughts: Should NRIs Worry About the New Remittance Tax?

Although the 3.5% NRI remittance tax is still in proposal stage, it marks a clear shift in US policy toward taxing outbound money transfers by non-citizens.

Key Takeaway: If passed into law, this could permanently change the way NRIs plan remittances, support families in India, and invest in Indian markets.

Stay proactive and informed. Work with professionals who understand the tax systems of both countries.

Dinesh Aarjav & Associates offers specialized support in NRI tax advisory services, remittance planning, and cross-border compliance.

Contact our NRI Experts today for a free consultation and get clarity on how to handle the 3.5% US remittance tax in 2025 and beyond.