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Remittance tax has been imposed on individuals, including NRIs, who are sending remittances to foreign countries from the U.S. If you are an NRI living, working, or studying in the U.S., it is important to understand the remittance tax, how it is imposed, and on whom it is imposed to make better financial decisions in the future.

This article provides you with the information about the US remittance tax 2026 for NRIs, which has been derived from the official IRS website and has been verified from various industry blogs.

• Remittance tax applies to NRIs and U.S. residents alike based on the method of payment, not citizenship.

• The rate is 1%, not 3.5% or 5% - those were proposal rates that never became law.

• Effective January 1, 2026, the tax affects remittances funded by cash or similar physical instruments.

• Use electronic or bank-funded transfers to avoid the 1% excise tax, where exempt.

• The IRS is actively coordinating compliance, deposits, and reporting, and remittance providers are responsible for collection and remittance.

The U.S. Congress passed the One Big Beautiful Bill Act (also referred to as H.R. 1, Public Law 119-21) on July 4, 2025. Under this Act, Section 4475 was added to the Internal Revenue Code to create a 1% federal excise tax on certain cross-border money transfers (remittances) from the U.S. to a foreign country.

This is not an income tax. It is an excise tax on eligible remittance transactions, collected and remitted to the Internal Revenue Service (IRS).

The remittance tax rate has changed as the bill evolved:

• Initially proposed at 5% in early drafts of the legislation.

• Later revised down to 3.5% during Congressional debate.

• The final enacted version sets the rate at 1%. This is the actual rate in current U.S. law.

The reduction to 1% was aimed at easing the financial burden on individuals (including NRIs) who send money internationally.

The remittance tax becomes effective on January 1, 2026, for all eligible transactions made after December 31, 2025.

Transactions subject to the tax:

• International remittances sent from the U.S.

• Where the sender funds the transfer with cash, money orders, cashier’s checks, or similar physical instruments.

The following are exempted if the transfers are funded through the following:

• Withdrawals from U.S. bank accounts

• Payments through U.S. debit/credit cards

• Digital wallets/electronic funds

• Certain financial institutions subject to Bank Secrecy Act reporting requirements

The exemption implies that remittances sent by NRIs through banking or financial technology routes like Wise, Remitly, Western Union bank transfers, etc., may not attract the 1% tax if the remittance is done electronically.

The law does not distinguish based on citizenship. Anyone in the U.S. who sends eligible remittances using taxable methods will be subject to the tax.

This includes:

• NRIs on work visas (e.g., H-1B, L-1, O-1)

• Green Card holders

• Foreign students (F-1, OPT, etc.)

• U.S. citizens or residents (the tax rule itself does not exempt them, although earlier drafts had proposed credits/exemptions for citizens)

Eligible for 1% Tax:

Sending $1,000 to India using cash at a remittance store. Tax applies ($10).

Not Eligible for Tax:

• The U.S. remittance tax is a federal excise tax classified under Chapter 36 of the Internal Revenue Code (IRC Section 4475).

• Remittance transfer providers include banks, Western Union, MoneyGram, and others. They must:

• Collect the tax from the sender when applicable

• Make semimonthly deposits

• File executing returns quarterly using IRS Form 720.

Conclusion

By understanding the applicability of the 2026 remittance tax, you can make the most out of your remittance by choosing to make the payment through modes like bank transfer or credit/debit cards, which are exempt from the 2026 remittance tax.

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