New draft of U.S. law cuts remittance tax to 1%, exempts bank and card transfers-OxBig News Network

U.S. legislators have significantly diluted the provision in the proposed legislation to tax remittances to other countries, including to India. The latest version of the Bill, released on Friday (June 27, 2025), reduces the tax on remittances to 1% from the earlier proposal of 3.5%, and excludes remittances made from bank accounts and other financial institutions and those made via debit or credit cards from the tax.

The 1% tax will now apply only on remittances made in cash, a money order, or a cashier’s check. According to international tax experts, this will come as a significant relief to the non-resident Indian (NRI) community in the U.S.

The ‘One Big Beautiful Bill Act’ was passed by the U.S. House of Representatives in May 2025. It is now up for debate in the U.S. Senate, following which it will be voted upon.

“There is hereby imposed on any remittance transfer a tax equal to 1 percent of the amount of such transfer,” the latest version of the Act says. “The tax imposed by this section with respect to any remittance transfer shall be paid by the sender with respect to such transfer.”

However, the latest draft also inserts additional paragraphs to the section on the tax on remittances.

“The tax imposed under subsection (a) shall apply only to any remittance transfer for which the sender provides cash, a money order, a cashier’s check, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider,” the draft Bill said.

In addition, the Bill now says that remittances made from “an account held in or by a financial institution” and “funded with a debit card or a credit card which is issued in the United States” are exempt from the tax.

“Senate Republicans released their updated draft of the proposed One Big Beautiful Bill Act on June 27 and have a self imposed deadline of July 4 to try to pass this bill,” Lloyd Pinto, Partner – U.S. Tax at Grant Thornton Bharat said. “The updated Senate version significantly changes the remittance transfer provisions that were passed by the House Republicans. In the latest Senate draft, the remittance transfer tax has been reduced to 1% from the erstwhile proposal of 3.5%.”

The 3.5% tax proposal itself was a reduction brought into the Act in May from the original proposal of 5%.

“This (the latest relaxations) should come as a huge relief to the NRI community in the US as 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 U.S.”