The recent hike in H-1B visa fees has sent shockwaves through the Indian IT sector, but a potentially more significant threat looms on the horizon: the "Halting International Relocation of Employment (HIRE) Act". While the fee increase presents an immediate financial burden, this Act could fundamentally reshape the industry's operating model.

The H-1B visa fee hike, with the US government sharply increasing the application fee to $100,000, nearly ten times the earlier $7,500–$10,000, poses a significant challenge to Indian IT companies. Industry analysts estimate that this could cut their core operating profits (EBITDA) by 7–15%. For instance, if TCS were to renew its FY23 H-1B visas in October 2025, the added cost of roughly $90,000 per petition could reduce EBITDA by 7–8%. The fee, effective from the next visa lottery cycle, transforms what was once a $2,000-$5,000 administrative cost into a make-or-break business decision. With the current median H-1B salary for Indian IT firms ranging between $80,000-$120,000, the visa fee now matches or exceeds an entire year's compensation.

However, the HIRE Act, introduced by US Senator Bernie Moreno, could be an even bigger disruptor. This bill proposes a 25% duty on US companies that outsource jobs in tech and other sectors. Even if the Act is diluted, experts anticipate strong resistance from US corporations heavily dependent on Indian outsourcing. A reduced tax rate of 10–15%, sectoral carve-outs, or phased implementation are possible outcomes. The combined effect of H-1B restrictions and tariffs on services would hurt both Indian IT companies and US customers.

In response to these challenges, Indian IT companies are likely to adopt several strategies. These include increasing offshoring to India or other cost-effective destinations, nearshoring to regions like Canada and Latin America, hiring more local talent in the U.S., and renegotiating contracts with clients to share the additional costs. Companies are also expected to leverage automation and cloud computing, and intensify efforts to upskill local talent.

NASSCOM clarifies that the H-1B visa fee hike will not affect current visa holders and will apply as a one-time fee only to fresh petitions. This alleviates concerns on business continuity and uncertainty for H-1B holders that were outside the U.S. Moreover, with the fee being applicable from 2026 onward, companies have time to further step up skilling programs in US and enhance local hiring. Indian and India-centric companies operating in the U.S. have significantly reduced their dependencies on H-1B visas and steadily increased their local hiring. H-1B workers for the top 10 Indian and India centric companies are less than 1% of their entire employee base.

The H-1B program has historically provided Indian engineers, software developers, and data scientists with a direct route to US employment. Last year, Indians accounted for over 70% of all H-1B visa holders. The sudden $100,000 upfront fee creates a steep financial hurdle. While tech giants can incorporate the cost into expansion budgets, startups and mid-sized firms, the typical entry points for many early-career Indian professionals, may struggle to sponsor visas.

The U.S. Labor Department said it would begin opening investigations of employers that “abuse” the H-1B visa program, as part of a broader effort to prioritize Americans over foreign-born workers in the labor market.

The Indian IT sector derives a significant portion of its revenue from the US. The fee hike alters the economics of deploying Indian tech workers in the US. Cost arbitrage between sending an Indian employee versus hiring locally in the US will reduce substantially, and hence companies need to rework hiring and pricing strategies to offset the impact of these changes.

The challenges could reinforce India's push for self-reliance. Policymakers are likely to scale back external dependence, diversify exposure and promote domestic demand and investment.