Key Takeaways
• A 3.5% remittance tax on money transfers by non-US citizens starts January 1, 2026.
• NRIs, H-1B workers, and others sending money abroad must pay the tax, exempting US citizens.
• The tax could reduce Indian remittances by billions, affecting families and the Indian economy.
A major change is coming for millions of immigrants in the United States 🇺🇸 who send money to their families abroad. On May 22, 2025, the US House of Representatives narrowly passed President Trump’s “One Big Beautiful Bill Act,” which includes a new remittance tax. This tax, originally proposed at 5%, has now been reduced to 3.5% after last-minute changes. The bill affects NRIs (Non-Resident Indians), H-1B workers, and other non-US citizens who regularly send money home. The Senate will now review the bill, and if approved, the tax will take effect on January 1, 2026.
This article explains what the new remittance tax means, who will be affected, how it will work, and what steps immigrants can take to prepare. We’ll also look at the possible impact on families, the Indian economy, and the choices people might make in response to this new rule.
What Is the Remittance Tax and Who Will Pay It?
The remittance tax is a 3.5% fee on all money transfers sent from the United States 🇺🇸 to other countries by non-US citizens. This includes:
- NRIs (Non-Resident Indians)
– H-1B workers (skilled professionals working in the US on a temporary visa) - L-1 visa holders (employees transferred within a company)
- F-1 student visa holders (international students)
- Green card holders who are not yet US citizens
US citizens and nationals are exempt from this tax, as long as they use a “qualified remittance transfer provider.” This means if you have US citizenship, you will not pay the tax when sending money abroad.
Key facts:
– The tax applies to every transfer, no matter how small.
– The tax is collected by banks and money transfer companies, then sent to the US Treasury.
– The tax cannot be claimed back or used to reduce your federal or state taxes.
How Will the Remittance Tax Work?
If the Senate approves the bill and it becomes law, the new tax will start on January 1, 2026. Here’s how it will work in practice:
- Every time a non-US citizen sends money abroad, 3.5% will be deducted as tax.
- For example, if you send $1,000 to India 🇮🇳, $35 will be taken as tax, and your family will receive $965.
- There is no minimum amount—even small transfers will be taxed.
- The tax will be collected by authorized remittance providers (like banks or money transfer apps).
- Providers will send the collected tax to the US government every quarter.
No official form is required from the sender, as the process is automatic through the remittance provider. For more details on remittance rules and providers, you can visit the Consumer Financial Protection Bureau’s official remittance page.
Why Was the Remittance Tax Introduced?
President Trump and supporters of the bill argue that the remittance tax will:
- Raise money for the US government
- Encourage more money to stay in the US economy
- Help fund border security and immigration enforcement
However, many critics say the tax unfairly targets immigrants, especially those who send money home to support their families. The tax could also hurt economies in countries that rely on remittances from the United States 🇺🇸.
Impact on Indian Diaspora and the Indian Economy
The United States 🇺🇸 is the largest source of remittances to India 🇮🇳. In 2023-24, over $33 billion was sent from the US to India, making up nearly 28% of all money India receives from abroad. There are about 4.46 million Indians living in the US, many of whom regularly send money home.
What does the new tax mean for Indian families?
– Less money received: For every $1,000 sent, families will get $35 less.
– Higher costs for education, healthcare, and daily needs: Many families in India depend on this money for basic expenses.
– States like Kerala, Uttar Pradesh, and Bihar—which rely heavily on remittances—could be hit hardest.
Economic experts warn that even at the lower 3.5% rate, the tax could reduce the amount of money flowing into India by billions of dollars each year. When the tax was first proposed at 5%, estimates suggested India could lose $12-18 billion annually, which could also weaken the Indian rupee.
How Will NRIs and H-1B Workers Respond?
Financial experts expect several changes in how NRIs, H-1B workers, and other immigrants handle their money:
1. Rush to Send Money Before the Tax Starts
Many people are likely to send large sums to India 🇮🇳 before January 1, 2026 to avoid the new tax. This could lead to a spike in remittances in late 2025.
2. Adjusting Budgets and Financial Plans
Families who regularly send money home will need to plan for the extra 3.5% cost. This might mean sending smaller amounts or sending money less often.
3. Using Informal Channels
Some may try to avoid the tax by using informal methods (like giving cash to friends traveling home), but this can be risky and is often illegal. Experts warn that using unofficial channels can lead to fraud and loss of money.
4. Restructuring Accounts
NRIs might look for ways to hold money outside the US 🇺🇸 or change how they manage their finances to reduce the impact of the tax.
What Do Financial Experts Say?
Lloyd Pinto, a US tax partner at Grant Thornton Bharat, says:
“In the short term, we expect remittances to India to spike before the effective date of January 1, 2026. We may also see a shift of some remittances from formal to informal channels.”
Nish Bhatt, CEO of Millwood Kane International, adds:
“The tax raises the cost of sending money to India. With time, this could lead to smaller remittances or less frequent transfers, especially for the middle class. Wealthy individuals may absorb the cost more easily, but for many, it will change how they plan and send money home.”
What Should NRIs and H-1B Workers Do Now?
If you’re an NRI, H-1B worker, or another non-US citizen who sends money home, here are some steps to consider:
1. Send Planned Transfers Early
If you know you’ll need to send a large amount for family support, education, or investments, consider doing so before December 31, 2025.
2. Review Your Budget
Factor the 3.5% tax into your future remittance plans. Adjust your savings and spending to account for the extra cost.
3. Talk to a Tax Advisor
A professional who understands both US and Indian tax laws can help you find the best way to manage your money and minimize the impact of the tax.
4. Use Official Channels
Always use authorized, IRS-compliant remittance providers. These companies will clearly show the tax and ensure your money is safe.
5. Stay Updated
The bill still needs Senate approval, and there could be changes or new exemptions. Keep an eye on official news and updates from trusted sources.
Possible Risks and Concerns
While the reduction from 5% to 3.5% is a relief, there are still concerns:
- Increased use of informal channels could make it harder to track money and increase the risk of fraud.
- Families in India 🇮🇳 may struggle if they receive less money for basic needs.
- The Indian economy could lose billions in foreign exchange, affecting the value of the rupee and the country’s financial stability.
As reported by VisaVerge.com, the new remittance tax is likely to have a wide impact, especially on the Indian diaspora and other immigrant communities who rely on sending money home.
What Happens Next?
The bill now moves to the Senate, where it will be debated and voted on. If the Senate approves the bill, President Trump is expected to sign it into law. The tax would then start on January 1, 2026.
If you are affected, it’s important to plan ahead and make any large transfers before the tax begins. Keep in touch with your bank or remittance provider for updates, and consult a tax expert if you have questions about your specific situation.
Frequently Asked Questions
Q: Who is exempt from the remittance tax?
A: Only US citizens and nationals are exempt, as long as they use a qualified remittance provider.
Q: Does the tax apply to green card holders?
A: Yes, unless they have become US citizens.
Q: Is there a minimum amount for the tax?
A: No, every transfer is taxed, no matter how small.
Q: Can I claim the tax back on my US taxes?
A: No, the remittance tax cannot be used to reduce your federal or state taxes.
Q: What if I use an informal channel?
A: Using unofficial methods can be risky, may be illegal, and could lead to loss of money or legal trouble.
Conclusion and Next Steps
The new 3.5% remittance tax is a major change for NRIs, H-1B workers, and other non-US citizens in the United States 🇺🇸. While the reduction from 5% offers some relief, the tax will still affect millions of families and could have a big impact on the Indian economy.
What you can do now:
– Send planned transfers before December 31, 2025
– Review your financial plans
– Consult a tax advisor
– Use official, compliant remittance providers
– Stay informed about any changes as the bill moves through the Senate
For more information on remittance rules and your rights, visit the Consumer Financial Protection Bureau’s official remittance page.
By planning ahead and staying informed, you can reduce the impact of the new tax on your family and finances.
Learn Today
Remittance Tax → A government fee charged on money sent from the US to other countries by non-citizens.
NRI → Non-Resident Indian living in the US who sends money back to India.
H-1B Worker → A skilled professional working temporarily in the US under an H-1B visa.
Qualified Remittance Provider → Authorized institutions like banks that handle money transfers and collect the remittance tax.
Informal Channels → Unofficial or illegal methods of sending money abroad to avoid taxes or fees.
This Article in a Nutshell
The US House passed a new 3.5% remittance tax affecting millions of noncitizens sending money abroad, with a January 2026 start date. This change impacts NRIs and H-1B workers, altering financial plans and potentially reducing remittances to countries like India significantly.
— By VisaVerge.com
