Indian IT Feels the Heat From Steep H-1B Fee

The US move to impose a $100,000 fee on new H-1B petitions has jolted India’s $283-billion technology services industry, in what analysts said will force companies to rework onsite hiring plans, revisit pricing, and lean harder on offshore delivery, even as a late clarification from Washington eased immediate panic for current visa holders.

US President Donald Trump on Friday sharply raised the application fee for workers seeking H-1B visas, a program heavily used by the industry. Indian citizens account for more than 70% of H-1B visa holders in the US.

The White House and US Citizenship and Immigration Services said the levy applies to new petitions filed after 12:01 a.m. EDT on 21 September, including the 2026 lottery, and does not apply to people who already hold valid H-1B visas or to renewals.

That guidance calmed fears about workers stuck abroad after the sudden proclamation, but it does not blunt the longer-term cost shock for fresh deployments.

As news of the presidential proclamation spread, several large technology and financial firms told H-1B staff to avoid international travel or return to the US before the effective time to avoid uncertainty.

After the clarification, many companies dropped emergency instructions but continued to advise caution while legal teams reviewed the fine print.

In a statement on Saturday, the Ministry of External Affairs said the Trump administration’s move is likely to have “humanitarian consequences,” warning of “potential disruptions for families” affected by the policy.

The ministry hoped the disruptions can be “addressed suitably” by the authorities in the US, adding that the full implications of the policy are being studied by the government.

Shares in Indian IT services firms fell on Monday, with the Nifty IT index declining 2.7% in Mumbai as the country’s largest outsourcing firms Tata Consultancy Services Ltd, Infosys Ltd, HCL Tech Ltd and Wipro Ltd all declined.

Meanwhile, with the fee limited to new filings from next year and exempting existing visas, industry body Nasscom said it expects only a marginal impact, adding that the sector has reduced its reliance on H-1B staffing over several years by ramping up local US hiring and investing in upskilling.

It said Indian and India-centric firms spend more than $1 billion on US talent development and that H-1B workers at the top 10 India-linked companies now represent a very small share of their global headcount.

Washington framed the policy as a way to protect American jobs and curb perceived misuse of the visa. The presidential proclamation restricts entry under H-1B classifications unless the petition is accompanied by the new payment, and directs the Department of Homeland Security and the Department of State to implement the order.

From a global lens, the fee collided with the needs of US tech and advanced-services employers that rely on high-skilled mobility.

A coalition of US companies, Compete America, urged a rethink, warning that the surcharge would deter needed talent and slow innovation. The US Chamber of Commerce signaled concern for both workers and employers.

Analysts, meanwhile, are split on the long-run impact. Moody’s Ratings said the fee will raise operating costs for Indian IT services, adding to the risk from proposals like the Help In Reducing Outsourcing Act’s (HIRE Act’s) possible 25% tax on certain outsourcing payments.

Some strategists, meanwhile, have argued that the change could ultimately hurt US competitiveness more than India’s share of global IT work.

Ajay Srivastava, founder of think tank Global Trade Research Initiative, said the fee will make onsite Indian staffing costlier than hiring Americans in many cases, pushing firms to accelerate offshoring and complete more work from India.

He said that means fewer H-1B petitions, less local hiring, higher project costs for US clients, and slower innovation, while creating an opportunity for India to deepen capacity in software, cloud, and cybersecurity.

That playbook of more offshore, fewer fresh H-1Bs, and selective onsite already fits how the industry has evolved since the last round of US visa scrutiny.

There is also a legal and policy cloud. Critics in the US immigration bar said the fee could face court challenges on statutory grounds. Business groups are lobbying for revisions or carve-outs. If litigation proceeds, the policy could be narrowed or stayed, although firms are planning around the rule as written for now.

For Indian IT exporters, the commercial calculus will vary by mix. Work requiring secure onsite access or deep client immersion will be the hardest to shift. Commodity roles and standardized implementation work are easier to push offshore or to nearshore centers in Canada, Mexico, or Eastern Europe.

Some brokerages even suggested modest but real earnings before interest and taxes (EBIT) margin pressure if companies absorb part of the cost, with scope to pass some of it through in price renegotiations.

A note from broker Prabhudas Lilladher flagged FY27 as the first full year when the fee could show up in numbers for firms with high US onsite intake from the 2026 cycle.

Meanwhile, in a reminder that the H-1B is a global instrument for advanced industries, not just an India–US corridor, South Korea’s foreign ministry said it would study the implications for its companies and talent pipelines.

That broader pressure could widen the coalition pushing Washington for changes, especially if hospitals, universities, and semiconductor fabs argue the surcharge hampers recruitment.