Trump’s H-1B fee plan threatens Indian IT’s onsite model

The proposal marks a fresh attempt by the Trump administration to impose the steep charge after a federal court struck down the earlier $100,000 fee introduced through a Presidential proclamation. Unlike the earlier measure, the new fee is being proposed by the Department of Homeland Security through formal rule-making under its fee-setting authority.

It would apply to new cap-subject H-1B petitions, including those eligible for the US advanced-degree exemption, but not to routine extensions or renewals of workers already counted against the H-1B cap.

The proposal, which is still at the rule-making stage, has so far failed to unsettle investors, with the Nifty IT index gaining 0.57% on Tuesday, ahead of the benchmark Nifty’s 0.48% rise. Infosys and TCS advanced 1.24% and 0.53%, respectively, while Wipro and HCL Techn declined 0.67% and HCLTech 0.47%.

The proposed fee would apply to new H-1B petitions subject to the annual cap, including beneficiaries eligible for the US advanced-degree exemption, and would be over and above existing fees. It would not apply to routine extensions or renewals of H-1B workers who have already been counted against the cap.

For Indian IT companies, the distinction is significant as the additional cost would primarily arise when bringing new workers into the H-1B system, rather than for maintaining their existing US workforce. “The impact will likely be felt across IT services firms with large teams moving between India and the US could see a more direct impact because international talent deployment is an important part of their operating model,” Amit Gajwani, chief operating officer at Mastek, said.

The proposal could also alter the economics of hiring overseas talent for US technology companies and startups. Large technology firms may have the financial capacity to absorb the additional cost for specialised or senior talent, but could still become more selective about new sponsorships.

Startups, particularly those operating in AI and other specialised areas where talent is scarce, could face a sharper constraint. “Consider the practical impact: A promising AI startup identifies a world-class machine learning expert who is currently completing a PhD abroad. Previously, the cost to sponsor this individual was around $4,000. Now it’s more than $107,000,” Rajiv Khanna, a US-based immigration attorney, said in legal commentary.

For Indian IT services companies, the likely response could be to reserve H-1B applications for consultants, senior architects and other roles where physical presence in the US is essential, while delivering more work remotely from India.

The shift could accelerate an existing trend towards distributed teams and India-based centres of excellence in cloud, data and AI. “This could accelerate a broader shift towards building and scaling delivery capabilities here. Companies will continue to move critical talent to the US where physical presence is essential, but the overall model could become more hybrid and balanced,” Gajwani said.

The proposed fee could therefore have a mixed impact on India, potentially reducing the movement of Indian technology workers to the US while increasing the amount of high-value work retained in the country. According to a Nasscom statement on Tuesday, H-1B workers in the technology sector have already reduced significantly over the past five years as companies expanded local hiring in the US.

The industry body said companies have also invested more than $1.1 billion in strengthening the STEM pipeline in the US, working with more than 130 universities and colleges and impacting 2.9 million students while upskilling more than 255,000 employees.

“The H-1B visa programme has long served an important purpose in addressing short-term skill gaps in the US,” Nasscom said, adding that any increase in visa fees should be viewed in the context of the programme’s original purpose of providing access to temporary skills where shortages exist.