In a significant development for the Indian diaspora, especially the non-resident Indian (NRI) community living in the United States, the US Senate has released a revised draft of its proposed legislation that dramatically softens its earlier stance on taxing remittance transfers. The latest draft reduces the proposed remittance transfer tax from 3.5% to just 1%, while also introducing key exemptions that are likely to benefit a large number of NRIs.
The update was included in the Senate Republican version of the One Big Beautiful Bill Act, released on June 27, with the aim of pushing it through by the self-imposed deadline of July 4. This legislation, in its latest form, appears to take a more practical and economically considerate approach towards how remittance taxes would be implemented, especially for those sending money abroad.
What’s New in the Senate Draft?
The standout change is the reduction in the tax rate from 3.5% to 1%, which significantly lowers the financial burden on those sending money to families and dependents abroad. Even more importantly, the tax will not apply to remittances made through US-based bank accounts or via debit and credit cards issued by US financial institutions.
According to the draft language, the 1% tax will be levied only when remittances are made using physical instruments like cash, money orders, cashier’s checks, or similar means. This makes digital and card-based transfers more attractive—and tax-free—under the proposed law.
“This should come as a huge relief to the NRI community in the US,” said Lloyd Pinto, Partner – US Tax, Grant Thornton Bharat. “They will not be subject to this remittance tax if the remittances are made through accounts held with designated US banks and financial institutions or funded via debit or credit cards issued in the US.”
Effective Date and Implications
As per the draft, the new remittance tax rule would go into effect for all transfers made on or after December 31. This gives individuals and financial institutions ample time to prepare for the changes and adjust their methods of transferring money overseas.
While the tax will still exist in some form, the limited scope and reduced rate make it far less burdensome than what was initially feared. For many NRIs who send money back home regularly to support their families, this change not only means savings but also avoids unnecessary complexities in complying with the tax code.
A Shift from the House Version
This latest Senate version of the bill represents a significant departure from the earlier House proposal, which had proposed a flat 3.5% tax on most outward remittances without clear exemptions for digital or bank-based transfers. The Senate’s more targeted approach seems to acknowledge the vital role of remittances in supporting families abroad while focusing the tax burden on less traceable forms of money transfer.
This shift may also reflect feedback from both financial experts and diaspora groups, who had raised concerns about the sweeping nature of the earlier proposal and its disproportionate impact on immigrant communities, especially Indians, Mexicans, and Filipinos, who are among the largest senders of remittances from the US.
What’s Next?
With July 4 approaching fast, Senate Republicans are pushing to pass the One Big Beautiful Bill Act swiftly. If the revised version passes the Senate, it would then need to be reconciled with the House version before being sent to the President for final approval.
Regardless of the final outcome, the Senate draft offers hope and relief for millions of NRIs who had been worried about a steep new tax on their hard-earned money. Financial advisors are now recommending that NRIs plan their year-end transfers wisely and consider shifting to bank or card-based channels if they haven’t already.
As Washington moves closer to finalizing the bill, this tax policy pivot highlights how community voices and expert feedback can shape legislation—even in matters as complex as taxation and immigration finance.
For NRIs in the US, the Senate’s softened stance on the remittance tax is not just a technical update—it’s a meaningful financial relief. With clarity emerging on the exempted modes of transfer, NRIs can now focus more on supporting their loved ones back home without worrying about excessive tax penalties.
