Key takeaways
- The 1% US tax applies only to transfers funded with cash, money orders or cashier's checks, from 1 January 2026.
- Transfers from a US bank account or with a US debit/credit card are exempt.
- Nothing changes in India — money sent home by an NRI isn't taxable income there.
What the tax is
- A 1% excise tax on remittance transfers made after 31 December 2025, under section 4475 of the US Internal Revenue Code (enacted in 2025).
- The sender bears it; the money-transfer provider collects it and pays it to the IRS.
- It applies to everyone sending, not only non-citizens.
Which transfers are taxed — and which aren’t
| How you fund the transfer | 1% tax? |
|---|---|
| Cash at a counter | Yes |
| Money order, cashier’s check or similar physical instrument | Yes |
| From your US bank or credit-union account (online transfer, wire, app linked to your account) | No |
| US-issued debit or credit card | No |
Proposed IRS regulations (April 2026) treat cashed-check proceeds as cash and include anti-avoidance rules; very small transfers excluded under existing remittance rules stay outside. Final regulations were not yet out at the time of writing.
The India side doesn’t change
- Money an NRI sends home isn’t income in India — no Indian tax on receiving it.
- Gifts to relatives are tax-free in India; gifts to non-relatives above ₹50,000 can be taxable for the recipient.
- Investing in India? Route money through an NRE account so it stays fully repatriable.
- Sending money out of India is a different matter — Indian TCS on remittances: TCS on foreign remittance.
Sources
Frequently asked questions
Does the US 1% remittance tax apply to bank transfers to India?
No. Transfers funded from a US bank or credit-union account, and transfers paid with a US-issued debit or credit card, are excluded. The tax applies to transfers funded with cash, money orders, cashier's checks and similar physical instruments.
When did the US remittance tax start?
It applies to remittance transfers made after 31 December 2025.
Who pays the US remittance tax?
The sender. The remittance transfer provider collects it and pays it to the IRS, and is liable if it fails to collect.
Is money received from abroad taxed in India?
Money an NRI sends to family isn't taxable income in India. Gifts from relatives are exempt; gifts above ₹50,000 from non-relatives can be taxable for the person receiving them.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.