HIRE Act, H-1B visa fee hike: Should IT stock investors be worried?
The US has sharply raised H-1B visa fees to $100,000 and is considering legislation—the HIRE Act—that would levy a 25 per cent tax on outsourcing payments.
- Sep 26, 2025,
- Updated Sep 26, 2025 9:09 AM IST
Nomura, in its latest IT note, warned that the H-1B visa fee hike and the proposed Halting International Relocation of Employment (HIRE) Act pose risks to India’s services exports. While near-term impact may be limited, the brokerage highlighted the need for strategic recalibration to mitigate longer-term risks.
India-US trade tensions, Nomura said, have moved beyond goods to services. The US has sharply raised H-1B visa fees to $100,000 and is considering legislation—the HIRE Act—that would levy a 25 per cent tax on outsourcing payments. Over 70 per cent of H-1B visa recipients in FY24 were Indian nationals. Software services make up nearly half of India’s services exports, with 54 per cent of that going to the US. Nomura estimates that the higher visa fees could hit IT company margins by 10–100 basis points in FY27. However, the brokerage noted that reliance on on-site work has declined from 17.8 per cent of delivery in FY11 to 10 per cent in FY24.
Nomura said lost revenues from H-1B dependent work could partly be offset by expanding exports through Global Capability Centres (GCCs), as US firms seek alternatives to onsite immigration. However, the HIRE Act, if passed, could pose a greater threat. Introduced by Republican Senator Bernie Moreno, the bill aims to “protect American workers from outsourcing” by taxing payments to foreign workers benefiting US consumers and eliminating deductions. Revenue would fund a ‘Domestic Workforce Fund’ for US worker training. The bill has not yet been passed.
Rising visa costs make sending professionals onsite largely unviable except for high-wage roles, pushing IT firms to shift delivery models, nearshore operations, and increase US-based hiring—raising costs and squeezing margins. Nomura analysts Abhishek Bhandari and Karan Nair estimate that 20–40 per cent of US-based IT staff are visa-dependent, and the fee hike could reduce margins by 10–100 basis points in FY27.
Long-term trends suggest adaptation is underway. RBI data shows off-site delivery of software services rising from 82.2 per cent in FY11 to 90 per cent in FY24, while onsite reliance fell from 17.8 per cent to 10 per cent over the same period. Cross-border software supply has grown from 67.4 per cent in FY11 to 83.5 per cent in FY24.
The HIRE Act remains uncertain in terms of passage, stringency, and enforceability, but given growing protectionist sentiment in the US, a diluted version cannot be ruled out. If implemented, it could significantly raise outsourcing costs and disrupt India’s services exports. Software exports are mostly delivered via cross-border contracts, and US firms account for 55–60 per cent of India-based GCCs. IT and computer services contribute nearly 8 per cent to India’s net value added, with other professional services adding another ~6 per cent.
Nomura noted potential offsets: taxes on services are harder to implement than on goods, firms can adjust transfer pricing, and moving operations from tier-1 to tier-2 or tier-3 cities could mitigate costs. Still, the HIRE Act challenges India’s core competitive advantage—its skilled, high-value services sector.
Nomura, in its latest IT note, warned that the H-1B visa fee hike and the proposed Halting International Relocation of Employment (HIRE) Act pose risks to India’s services exports. While near-term impact may be limited, the brokerage highlighted the need for strategic recalibration to mitigate longer-term risks.
India-US trade tensions, Nomura said, have moved beyond goods to services. The US has sharply raised H-1B visa fees to $100,000 and is considering legislation—the HIRE Act—that would levy a 25 per cent tax on outsourcing payments. Over 70 per cent of H-1B visa recipients in FY24 were Indian nationals. Software services make up nearly half of India’s services exports, with 54 per cent of that going to the US. Nomura estimates that the higher visa fees could hit IT company margins by 10–100 basis points in FY27. However, the brokerage noted that reliance on on-site work has declined from 17.8 per cent of delivery in FY11 to 10 per cent in FY24.
Nomura said lost revenues from H-1B dependent work could partly be offset by expanding exports through Global Capability Centres (GCCs), as US firms seek alternatives to onsite immigration. However, the HIRE Act, if passed, could pose a greater threat. Introduced by Republican Senator Bernie Moreno, the bill aims to “protect American workers from outsourcing” by taxing payments to foreign workers benefiting US consumers and eliminating deductions. Revenue would fund a ‘Domestic Workforce Fund’ for US worker training. The bill has not yet been passed.
Rising visa costs make sending professionals onsite largely unviable except for high-wage roles, pushing IT firms to shift delivery models, nearshore operations, and increase US-based hiring—raising costs and squeezing margins. Nomura analysts Abhishek Bhandari and Karan Nair estimate that 20–40 per cent of US-based IT staff are visa-dependent, and the fee hike could reduce margins by 10–100 basis points in FY27.
Long-term trends suggest adaptation is underway. RBI data shows off-site delivery of software services rising from 82.2 per cent in FY11 to 90 per cent in FY24, while onsite reliance fell from 17.8 per cent to 10 per cent over the same period. Cross-border software supply has grown from 67.4 per cent in FY11 to 83.5 per cent in FY24.
The HIRE Act remains uncertain in terms of passage, stringency, and enforceability, but given growing protectionist sentiment in the US, a diluted version cannot be ruled out. If implemented, it could significantly raise outsourcing costs and disrupt India’s services exports. Software exports are mostly delivered via cross-border contracts, and US firms account for 55–60 per cent of India-based GCCs. IT and computer services contribute nearly 8 per cent to India’s net value added, with other professional services adding another ~6 per cent.
Nomura noted potential offsets: taxes on services are harder to implement than on goods, firms can adjust transfer pricing, and moving operations from tier-1 to tier-2 or tier-3 cities could mitigate costs. Still, the HIRE Act challenges India’s core competitive advantage—its skilled, high-value services sector.