Thousands of H-1B workers who travelled to India are now stuck there for months because of long visa interview delays. What began as a routine trip home has turned into a major headache—not just for workers, but also for their US employers. Companies are now struggling with a tough question: should they allow these employees to work remotely from India for a long period, or risk losing them altogether? Either option comes with serious tax and legal consequences.
H-1B workers stuck in India leave US companies in a tax fix
The issue began in mid-December, when US consular offices suddenly rolled out stricter social media screening rules. Visa interviews were pushed back with no warning. Some appointments have now been rescheduled as far out as 2027.
The timing couldn’t have been worse. Many H-1B workers had travelled during the holiday season, which is when they usually renew their visas. The situation has been especially chaotic for Indian workers, who make up the largest share of the H-1B workforce. The State Department has not said how many interviews were affected. But nearly 17,000 H-1B visas were issued in Chennai alone in December 2024, according to Bloomberg. Because of the delays, families have been separated, children’s schooling has been disrupted, and careers have been thrown into limbo.
Remote work could trigger heavy taxes
Letting stranded employees work remotely from India may sound like a simple fix. But tax experts believe it could create serious problems. Allowing long-term remote work could lead to the creation of a “permanent establishment” in India, said Parizad Sirwalla, partner and national head of tax at Global Mobility Services at KPMG India, in a statement to Bloomberg. If that happens, the US company may suddenly be treated as having a taxable business presence in India. That would mean paying Indian taxes and complying with reporting rules.
“The tax and reporting obligations that would entail mean employers need to carefully analyse activities that workers can perform while present in the country,” Sirwalla told Bloomberg.
India’s tax rules add more uncertainty
The US-India income tax treaty dates back to 1989, and experts say there is still no clear guidance on when Indian authorities decide a company has crossed the line into having a permanent establishment.
“India is generally assertive in identifying PEs and making corresponding adjustments,” said Clark Armitage, an international tax attorney at Caplin & Drysdale. “Any time a US company has employees working for it in India, a PE risk exists and should be evaluated.” Companies now face a difficult choice. They can argue that no permanent establishment exists, suspend or terminate employees, accept the tax burden and claim US tax credits later, or move workers to Indian subsidiaries if possible.
“Whatever choice the company makes, it likely will want to consult with an Indian adviser about the risks and likely outcomes,” Armitage told Bloomberg.
Workers fear losing everything
One H-1B worker from Chicago told Bloomberg he traveled to India in November, believing it would be a short visit. His interview was first moved from late December to June, and then canceled altogether.
He has been told his job will be terminated if he cannot return by March. Finding a new sponsor would be nearly impossible. Under new rules, employers must pay a $100,000 fee for H-1B workers approved through consular processing, a cost few companies are willing to take on.
“So losing my job in this situation doesn’t just mean unemployment. It can mean the end of my US career, permanently,” he said. “Right now it genuinely feels like everything I built over seven years is collapsing because I took one flight home to see my parents.”
Many employers are now exploring options like unpaid leave if remote work is not possible. Each case depends on where the worker is located, what kind of work they do, and how the tax rules apply.