How NRIs Can Avoid Remittance Tax ?

 With its large global workforce, India is the biggest receiver of remittances from the United States

A number of steps are being taken by the U.S. government, as part of its long-term strategy to Make America Great Again (MAGA). One of these steps is the proposed tax to be imposed on remittance made from the United States to other countries.

While it was earlier proposed to be 5%, the proposed remittance tax is 3.5% as per the new One Big Beautiful Bill Act. This can be a burden on NRIs who regularly send money to India to support their families and parents. Let us take a look at some legal options that can be used to avoid the remittance tax when it is implemented.

U.S. citizen - The remittance tax is not applicable on US citizens. You will need to have a U.S. passport or a certificate of citizenship. You will need these documents to avoid the remittance tax or to claim tax credit at the time of filing your tax return. Naturalized citizens can also avoid remittance tax, but they will need proper verification. As non-citizens including green card holders are required to pay remittance tax, they need to explore other legal options to avoid the tax.

Use USA-issued credit cards - NRIs often send money to meet everyday expenses of their families living in India. Groceries, medical bills, utilities, education fees, etc. are often among the common expenses. In case of such expenses, the remittance tax can be avoided by using a credit card issued in the United States.

It is true that there will be a foreign transaction fees on such credit card spends. But it will be usually lower than the proposed 3.5% remittance tax. Online payment options are available for most things in India. So, using a US-based credit card can be a good way to avoid the remittance tax in a legal manner.

Send money before the remittance tax bill is implemented - Many NRIs send large sums of money for things like investment, property purchase, etc. If you have similar plans, you can send the money before the remittance tax bill is approved by the Senate and become a law. Some sources say that the remittance tax could come into effect by December 2025 or January 2026. If you send money in the coming months, you can avoid paying the remittance tax entirely.

As is evident from above, a number of legal options are available to avoid the remittance tax. If you need more information, you can probably get in touch with a certified tax consultant. Make sure you avoid risky options such as cryptocurrency wallets, hawala, etc. These can lead to legal consequences and fines.