The 1% US Remittance Tax Is Live: What NRIs Sending Money to India Should Do

What the Tax Is

Effective January 1, 2026, the US imposes a 1% federal excise tax on certain remittance transfers sent abroad. It was enacted under Section 70604 of the One Big Beautiful Bill Act (signed July 4, 2025), which added new Section 4475 to the Internal Revenue Code. Early drafts proposed 5%; the final rate is 1% — and it applies to all senders regardless of citizenship or immigration status.

The Key Detail: It's About How You Fund the Transfer

• Taxed: transfers funded with physical cash, a money order, or a cashier's check handed to a remittance provider.
• Exempt: transfers funded from a US bank account, or with a US-issued debit or credit card. Transfers of $15 or less are also excluded, as are genuine commercial/business remittances.

Translation: if you send money to India through your bank, a wire, or an app like Wise or Remitly funded from your bank account, the tax does not apply to you. It only hits cash-funded transfers at physical counters — for example, $10 extra on a $1,000 cash transfer.

Who Collects It

The remittance provider collects the tax at the point of transfer, deposits it semimonthly, and reports quarterly to the IRS on Form 720. You do not report or pay anything separately on your Form 1040. In April 2026, Treasury and the IRS issued proposed regulations clarifying definitions, and earlier penalty-relief guidance (Notice 2025-55) covers providers during the first quarters of 2026.

The India Side: No Tax on Receipt

Money you send from abroad to your parents', spouse's, or other close relatives' bank account in India is not taxed as income in their hands — Indian law does not treat an inward remittance itself as income. The TCS you may have read about (Section 206C(1G)) applies to outward remittances above ₹10 lakh made by Indian residents under the LRS — it has nothing to do with your inward transfers.

Practical Takeaways for NRIs

• Fund transfers from your US bank account or card — never cash at a counter — and the 1% tax never touches you.
• Keep gift documentation for large transfers to family; while receipt isn't taxed, gifts to non-relatives above ₹50,000 can be taxable for the recipient.
• Watch for IRS guidance on Section 36C, which may allow a credit for remittance tax paid — not yet issued as of mid-2026.

Planning a Large Transfer?

For property purchases, family support structures, or repatriation planning between the US and India, the remittance tax is the smallest piece of the puzzle — FEMA limits, TCS, and DTAA positions matter far more. Talk to us before you move six figures.