New draft of U.S. regulation cuts remittance tax to 1%, exempts financial institution and card transfers

U.S. legislators have considerably diluted the availability within the proposed laws to tax remittances to different international locations, together with to India. The newest model of the Bill, launched on Friday (June 27, 2025), reduces the tax on remittances to 1% from the sooner proposal of three.5%, and excludes remittances produced from financial institution accounts and different monetary establishments and people made through debit or bank cards from the tax.

The 1% tax will now apply solely on remittances made in money, a cash order, or a cashier’s test. According to worldwide tax specialists, this can come as a major reduction to the non-resident Indian (NRI) neighborhood within the U.S.

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

“There is hereby imposed on any remittance switch a tax equal to 1 p.c of the quantity of such switch,” the newest model of the Act says. “The tax imposed by this part with respect to any remittance switch shall be paid by the sender with respect to such switch.”

However, the newest draft additionally inserts extra paragraphs to the part on the tax on remittances.

“The tax imposed beneath subsection (a) shall apply solely to any remittance switch for which the sender supplies money, a cash order, a cashier’s test, or some other comparable bodily instrument (as decided by the Secretary) to the remittance switch supplier,” the draft Bill stated.

In addition, the Bill now says that remittances produced from “an account held in or by a monetary establishment” and “funded with a debit card or a bank card which is issued within the United States” are exempt from the tax.

“Senate Republicans launched their up to date draft of the proposed One Big Beautiful Bill Act on June 27 and have a self imposed deadline of July 4 to attempt to cross this invoice,” Lloyd Pinto, Partner – U.S. Tax at Grant Thornton Bharat stated. “The up to date Senate model considerably modifications the remittance switch provisions that had been handed by the House Republicans. In the newest Senate draft, the remittance switch tax has been diminished to 1% from the erstwhile proposal of three.5%.”

The 3.5% tax proposal itself was a discount introduced into the Act in May from the unique proposal of 5%.

“This (the newest relaxations) ought to come as an enormous reduction to the NRI neighborhood within the US as they won’t be topic to this remittance tax if the remittances are made by means of accounts held with designated US banks and monetary establishments or funded through debit or bank cards issued within the U.S.”