The H-1B visa price hike is claimed to be a serious blow to the Indian IT corporations, however a doubtlessly larger risk is looming on the Indian IT sector, which might considerably erode Indian IT corporations’ income and profitability.
The Halting Worldwide Relocation of Employment (HIRE) Act, tabled in September 2025 by Ohio Republican Senator Bernie Moreno, goals to discourage US corporations from outsourcing jobs to international employees. The invoice seeks to impose a 25 per cent tax on funds made to international corporations for providers supplied to American shoppers.
HIRE Act an even bigger threat than H-1B visa price hike
India’s $280 billion IT providers trade is observing a threat of extreme disruption because the HIRE Act will guarantee tax on outsourced providers.
Main Indian IT corporations, together with TCS, Infosys, Wipro, HCL Tech, and Tech Mahindra, derive about 50–60 per cent of their income from the US.
In response to Kotak Securities, India’s IT providers trade derives over 60 per cent of its export revenues from the US, translating to roughly $150 billion out of the $250 billion sector dimension.
The brokerage agency mentioned the proposed 25 per cent tax on outsourcing funds instantly targets this income stream.
“If enacted, it might inflate consumer prices by as much as 46 per cent when the disallowance of deductions is factored in. This jeopardises deal renewals and new bookings, particularly in cost-sensitive verticals like banking, monetary providers, and insurance coverage (BFSI) and retail, which dominate US contracts,” mentioned Kotak.
“The HIRE Act might compress working margins by 500 to 1,000 foundation factors for Indian IT corporations, based on Merisis PMS estimates. Mid-tier corporations equivalent to LTIMindtree and Mphasis, which function at 12–15 per cent EBIT margins, are notably weak. In distinction, massive caps like Infosys, with 20–22 per cent margins, could soak up shocks higher however nonetheless face erosion,” Kotak mentioned.
Consultants concern that the 25 per cent tax on outsourcing will kill high-paying jobs and drive IT corporations to supply providers at a lower cost to the US. This may lead to low income and revenue for the IT sector.
A success on the IT sector’s income might considerably have an effect on India’s GDP, because the tech sector added $283 billion to GDP in 2024—7.3 per cent of whole GDP. In response to the NASSCOM President, the expertise sector will contribute round $1 trillion to the nation’s GDP by 2030. Notably, India goals to develop into a $7 trillion financial system by 2030.
Can the HIRE Act develop into a actuality?
Consultants see the opportunity of the HIRE Act changing into a actuality as distant. They see the invoice’s introduction as a stress tactic towards India.
“The proposed HIRE Act would undoubtedly be a extreme blow to the Indian IT sector. Nevertheless, it’s too early to conclude that it’s going to really be carried out. For my part, the present H-1B visa price hike seems to be extra of a tactical bargaining instrument forward of our minister’s go to to Washington,” mentioned G. Chokkalingam, founder and head of analysis at Equinomics Analysis Personal Restricted.
Chokkalingam identified that if the US administration actually supposed to take a tough line, it might have imposed the hike throughout the board, somewhat than proscribing it to new purposes, and even launched a recurring price as a substitute of a one-time cost.
VK Vijayakumar, Chief Funding Strategist at Geojit Investments, additionally believes the invoice is extremely unlikely to go — at finest, there’s solely a distant likelihood. Nevertheless, if it does undergo, it might deal a critical blow to the Indian IT sector.
In the meantime, many Republicans are progressively distancing themselves from Trump’s insurance policies, believing they may hurt America’s long-term development prospects and finally harm the US greater than its buying and selling companions.
Vijayakumar highlighted that Trump’s tariff insurance policies are already fuelling inflation. Headline figures of two.7–2.9 per cent understate the issue as a result of providers inflation stays low whereas items inflation is rising sharply as increased tariffs are progressively handed by means of to shoppers.
“Within the coming months, because the financial system weakens considerably, inflationary pressures could ease — however till then, the inflation backdrop will stay extraordinarily difficult,” mentioned Vijayakumar.
Chokkalingam mentioned we should wait and look ahead to now. But when commerce negotiations fail, we needs to be ready for the opportunity of a tax on IT providers, successfully extending the tariff warfare to the providers sector.
“In that state of affairs, massive IT corporations might face extended underperformance. Subsequently, I proceed to take care of an underperform score on massive IT providers corporations,” mentioned Chokkalingam.
“Whereas the HIRE invoice might go with a average levy—say 5–10 per cent somewhat than an aggressive 25 per cent—the chance of harsher measures rises if commerce talks collapse. This makes the end result of bilateral commerce discussions completely essential for each the financial system and the markets,” mentioned Chokkalingam.
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Disclaimer: This story is for academic functions solely. The views and proposals expressed are these of particular person analysts or broking corporations, not Mint. We advise traders to seek the advice of with licensed consultants earlier than making any funding choices, as market situations can change quickly and circumstances could range.
