WASHINGTON (Diya TV) — India is closely monitoring a proposed U.S. tax reform bill that could impact the billions of dollars its citizens receive from abroad each year. The latest version of the “One Big Beautiful Bill Act” has eased earlier concerns by lowering the proposed tax on remittance transfers from the U.S. to just 1%, down from an initial 5%.
India is the largest recipient of international remittances in the world. In 2024, the country received $129 billion in total, according to the World Bank. Of that, 28% came from the United States alone. That makes the U.S. India’s biggest remittance partner.
The revised legislation now imposes a 1% tax on remittances sent from the United States. The tax applies to money transfers made through cash, money orders, or cashier’s checks. The sender must pay the tax. However, there’s an important exemption. Transfers made through U.S.-issued debit or credit cards, or from bank accounts, will not face this tax.
This clause is a major relief for many non-resident Indians (NRIs) who use banks and digital platforms to send money home. These methods cover the majority of remittance transactions, especially for professionals and skilled workers living in the U.S. The bill’s original draft, introduced in early 2024, called for a 5% tax. In May, lawmakers scaled that figure down to 3.5%. Now, after further revisions, it stands at 1%.
The United States is home to about 2.9 million Indian immigrants, many of whom are on H-1B and other temporary work visas. They regularly send money to support their families in India. These remittances help pay for food, education, healthcare, and housing. For many Indian households, this income is vital.
The proposed tax initially caused concern among the Indian diaspora. A higher rate could have reduced the amount of money families received. But the latest revision, along with the exemptions, has calmed some of those fears. Still, Indian officials and financial experts are watching the bill’s progress closely. Even a small barrier could affect the flow of funds that support millions of people.
Remittances also contribute to India’s foreign exchange reserves and overall economic stability. Remittances account for a significant portion of India’s foreign income. In 2024, they made up 14.3% of the global total. A large part of that money came from Indian workers and professionals living in Gulf nations, the U.S., the U.K., and Canada.
Any change in U.S. tax law that affects remittances will have ripple effects. It could influence not just personal finances, but also India’s national economy. A drop in remittance inflows could weaken the rupee, strain foreign reserves, and reduce spending in rural and semi-urban areas. The latest 1% rate is seen as manageable, especially given the exemptions.
However, analysts warn that even low taxes can discourage transfers if compliance becomes complicated or if transaction fees rise as a result. The revised bill is still making its way through the U.S. Congress. While the 1% tax and exemptions provide some clarity, final approval is still pending. Indian officials are in touch with U.S. lawmakers and are advocating for minimal disruption to the remittance pipeline.
For now, most NRIs who use standard banking methods to send money won’t be affected. But the uncertainty has made many more aware of how dependent they are on the rules set by another country. India’s reliance on U.S.-based remittances highlights the strong ties between the two nations. The current version of the U.S. tax reform bill appears less harsh than originally feared.
But any move that affects this crucial financial channel will be felt in millions of Indian homes. As the bill moves forward, families, workers, and financial institutions in both countries will be watching its progress very closely.
