President Donald Trump is about to signal the ‘One Huge Lovely Invoice’ into legislation, a tax-and-spending bundle that features a 1 per cent tax on cash-based remittances. This revised tax, down from the initially proposed 5 per cent, applies to non-citizen residents, together with hundreds of thousands of Indians within the US.
On the Fourth of July, US President Donald Trump is about to signal the ‘One Huge Lovely Invoice’ ’into legislation, a sweeping tax-and-spending bundle that would form the financial course of his second time period. Dubbed the “One Huge, Lovely Invoice”, the laws had been caught in weeks of gridlock earlier than lastly clearing Congress by a slender vote. Whereas the legislation makes main adjustments to US tax coverage and federal spending, one particular provision has drawn explicit consideration in India: a brand new tax on sure abroad cash transfers. After intense negotiations, the remittance tax initially proposed at 5 per cent has been pared right down to 1 per cent within the ultimate model, providing important reduction to hundreds of thousands of Indians residing within the US.
What the remittance clause says
The ultimate textual content of the legislation states {that a} 1 per cent tax might be levied on sure cross-border remittance transfers, outlined as funds made utilizing money, cash orders, cashier’s cheques, or comparable devices. The tax should be paid by the sender on the time of switch.
Importantly, financial institution transfers and digital funds funded by way of debit or bank cards issued by US banks are exempt from this tax.
The brand new rule covers all US residents who are usually not Americans together with H-1B and H-2A visa holders, college students on F-1 visas, and Inexperienced Card holders. In impact, this is applicable to a big portion of the Indian diaspora within the US, at present estimated at round 4.5 million, together with over 2.9 million Indian-born immigrants, in line with the Migration Coverage Institute. The tax takes impact from January 1, 2026.
Why this issues to India
India is the most important recipient of remittances on the planet, in line with the World Financial institution. In 2023 alone, India obtained USD 129 billion in private remittances, with greater than 1 / 4 of that round USD 36 billion coming from the US.
In states equivalent to Kerala, Uttar Pradesh, Bihar and Punjab, month-to-month remittances assist households meet important wants equivalent to meals, college charges, medical bills, weddings and even dwelling building. In a number of districts, this revenue performs a task much like a welfare web. Nevertheless, the slender scope of the brand new rule affecting solely cash-based or bodily transactions means its real-world affect could also be restricted, notably amongst middle-class professionals who depend on digital banking providers.
From 5 per cent to 1 per cent: What modified
When the invoice was first launched within the US Home of Representatives in Might, it included a controversial 5 per cent tax on all outbound remittances utilizing money or equivalents. That determine was trimmed to three.5 per cent within the Home model, earlier than being additional slashed to 1 per cent within the ultimate draft cleared by the Senate on June 27.
The shift got here after strain from immigrant teams, Indian-American organisations, and even some Republican lawmakers from states with massive immigrant populations. Lawmakers reportedly warned {that a} excessive remittance tax would disproportionately damage law-abiding, tax-paying non-citizen employees who contribute considerably to the American financial system.
For NRIs and college students, a blended consequence
The revised legislation implies that most bank-based digital remittances together with these despatched by way of banks like SBI USA, ICICI Financial institution, or providers like Remitly, Clever and Western Union (if funded by a US-issued card or account) will stay unaffected.
For college students, who typically depend on cash-based providers for smaller transfers, and for low-wage employees on seasonal visas who might not have entry to full banking providers, the tax could possibly be an added burden. Even so, a 1 per cent cost is way lower than what was initially feared.
Past remittances: The larger invoice
Whereas the remittance provision often is the most related to Indians, the broader laws marks a dramatic reshaping of US federal priorities.
The brand new legislation contains:
- Prolonged tax cuts for people and companies, together with deductions on ideas and additional time wages (till 2028)
- Elevated defence and border funding, together with over USD 46 billion for brand new border safety infrastructure and 1000’s of latest immigration officers
- A USD 25 billion allocation for a missile defence system dubbed the ‘Golden Dome’
- A brand new programme giving USD 1,000 financial savings accounts to each new child
- Tighter eligibility guidelines for meals help (SNAP) and Medicaid
- Discount or rollback of fresh power tax credit and EV incentives
Democrats have criticised the invoice, warning that it may push hundreds of thousands off public medical insurance and widen revenue inequality. The non-partisan Congressional Funds Workplace has projected that as many as 12 million Individuals may lose Medicaid protection inside a decade. The Trump administration disputes these figures.
What subsequent for Indian households?
With the invoice set to be signed into legislation, the countdown has begun for its implementation in January 2026. NRIs, college students and Indian households might want to adapt primarily by routing their remittances by way of exempted banking channels.