US Senate Cuts Remittance Tax to 1%; No Impact on Indian Investors’ your US Stocks Withdrawals

In a major relief to Non-Resident Indians (NRIs), the U.S. Senate has introduced a revised draft of the "One Big, Beautiful Bill" that significantly softens the impact of the previously proposed remittance tax. The updated Senate version reduces the tax from the earlier 3.5 percent to just 1 percent. 

This tax is not expected to apply to Indian residents investing in U.S. stocks and withdrawing their money to bring it back to India. Even more importantly, it excludes transfers from U.S. bank accounts and debit or credit cards issued in the United States, shielding a large share of everyday remittances. 

This move is being seen as a big win for NRIs, many of whom send regular money transfers to support their families or invest in India. The tax, as per the Senate proposal, would apply only to non-exempt transfers made after December 31, 2025. 

Let’s break down what this development means and how it affects Indians living in the U.S. and those investing in U.S. stocks from India.

What is "The One Big, Beautiful Bill"?

"The One Big, Beautiful Bill" is a sweeping, 1,116-page legislative package passed by the U.S. House of Representatives on May 22, 2025. It reflects former President Donald Trump's economic vision and includes a range of tax reforms and spending measures. Among the most talked-about provisions is the introduction of a new excise tax on international remittance transfers made by individuals who are not U.S. citizens.

Initially, the bill proposed a steep 5 percent tax. The House version brought it down to 3.5 percent, but this still raised concerns, especially among NRIs. The latest Senate version offers considerable relief by reducing the tax further to 1 percent and introducing key exemptions.

What Has Changed in the Senate Version of The One Big, Beautiful Bill?

Here’s what the Senate proposal brings to the table:

• Lower Tax Rate: Reduces the remittance tax from 3.5 percent (House version) to just 1 percent.
• Key Exemptions Introduced:
  • Transfers from bank accounts held at U.S. banks and other regulated financial institutions are excluded.
  • Remittances made using debit and credit cards issued in the U.S. are also excluded.
• Implementation Timeline: The tax will apply only to applicable transfers made after December 31, 2025.

This means that a large portion of routine remittances, such as monthly transfers to family members in India, may fall outside the scope of this tax if done via exempt channels.

How Will the Remittance Tax Work?

If the Senate version becomes law, the remittance tax would be collected at the point of transfer. Non-bank methods or cash-based remittance services could still fall within the taxable scope.

Transfer services that are not covered under the exemptions would be required to deduct 1 percent from the transferred amount and remit it to the U.S. government. Verified U.S. citizens and nationals would not be subject to this tax if their service provider has the required verification agreement with the U.S. Treasury.

Read more about the Remittance Tax proposed in the The One Big, Beautiful Bill Here

Does This Affect People Investing in U.S. Stocks from India?

No. This tax will not affect people investing in US Stocks from India as it is not intended to apply to capital repatriation from investments.

If an Indian resident sells U.S. stocks and transfers the proceeds back to their Indian bank account through formal banking or brokerage channels, that transaction is not considered a remittance under this bill. It falls under investment withdrawal, not personal money transfer.

Let’s clarify the distinction with a table:

Key Clarification:
If you are an Indian resident who invests in U.S. stocks and later withdraws your gains directly from a U.S. brokerage account into your Indian bank account, it is considered capital repatriation. Such transactions are not classified as remittances and therefore do not fall under the purview of this proposed excise tax.

Impact on Indian Remittances from the U.S.

Even with the reduced rate, the potential tax can still add up depending on the method of transfer and the volume of remittances.

• Indian-origin population in the U.S.: Around 4.5 million people, including approximately 3.2 million of Indian origin
• Remittances from the U.S. to India in FY24: Approximately 28 percent of India’s total remittances of $118.7 billion, which equals nearly $32.9 billion
• 1 percent tax impact: If applied to the full $32.9 billion, that would result in $329 million in remittance taxes annually
• Individual impact: A person sending $1,000 using a non-exempt method would pay $10 as tax. Over time and repeated transfers, these charges could accumulate

Thanks to the exemptions in the Senate proposal, this impact will likely be far smaller than originally feared, as most formal remittances will qualify for the exemption.

What Happens Next?

Now that the Senate has released its version, the bill is not yet ready for presidential approval. The next step is for the House and Senate to reconcile their versions of the bill. This usually happens through a conference committee, where members from both chambers negotiate a final draft. Once both the House and the Senate agree on a unified version, it will be sent to the President for signing into law.

While the remittance tax initially caused alarm among NRIs, the Senate’s revised proposal has drastically reduced both its rate and reach. If passed in its current form, the 1 percent tax will likely affect only a small fraction of transfers, mainly those not using exempted bank accounts or cards.

For Indian residents investing in U.S. stocks, there is no cause for concern. Your investment withdrawals remain unaffected by this bill. As always, staying updated and using formal financial channels for transfers will help you avoid any surprise tax deductions.

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