Will the H-1B Visa Fee Increase Harm Indian IT Firms?
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Synopsis
The US government's new fee structure for H-1B visas is set to make waves in the Indian IT sector. Although projections suggest only a slight impact on operational margins, the broader implications for revenue growth and client costs are significant. Will this change reshape the industry landscape?
Key Takeaways
- US imposes a $1 million fee on new H-1B visas.
- Indian IT margins to drop by 10-20 bps.
- Revenue growth projected at 2-4 percent this fiscal year.
- Companies likely to pass costs to clients.
- Decline in reliance on H-1B visas noted.
New Delhi, Sep 25 (NationPress) The recent move by the US government to implement a $1 million fee on new H‑1B visas for foreign workers is anticipated to impact the operating margins of Indian IT services firms by merely 10 to 20 basis points in the upcoming fiscal year. According to a report released on Thursday, these companies are likely to transfer a portion of the costs to their clients.
Top IT exporters in India, which reported operating margins of around 22 percent last fiscal year, are forecasted to pass on between 30 to 70 percent of the additional costs to their customers, as indicated by a study from Crisil Intelligence.
The Indian IT services sector is projected to achieve revenues of $143-145 billion this fiscal year, reflecting a growth rate of 2-4 percent compared to the previous year, followed by a period of either marginal or stagnant growth.
The US government has clarified that this directive, effective from September 21, 2025, will not affect current H1B visa holders or their renewals, thereby minimizing its immediate impact.
Over the past few years, the dependency of IT firms on H-1B visas has been declining as companies have opted for offshore delivery, established nearshore centers, and increased local hiring in the US.
Data from the government shows a significant drop in the number of Indian employees holding H-1B visas at TCS, Infosys, Wipro, and HCL Technologies, decreasing from 34,507 to 17,997 between 2017 and 2025.
Employee expenses comprised 55-57 percent of sales for Indian IT firms last fiscal year, while visa-related costs accounted for only 0.02 to 0.05 percent of total employee expenses, with H1-B visa fees ranging from $2,000 to $5,000 per individual.
If the current job market trends persist, ICRA anticipates that the revised fee structure could increase visa costs to 1.0 percent of total employee expenses.
Major IT players like TCS, Infosys, Wipro, and HCL derive 96 percent of their revenues from international markets, with the US representing around 53 percent of that total.
India continues to lead as the top recipient of remittances, receiving $118.7 billion in fiscal 2024, with approximately 23 percent originating from the US.
Point of View
I recognize the delicate balance our IT sector must maintain amidst evolving regulations. While the immediate impact of the H-1B visa fee increase appears modest, the long-term implications warrant close monitoring. Our industry must adapt and innovate to thrive in an increasingly competitive global market.
NationPress
25/09/2025
Frequently Asked Questions
What is the new fee for H-1B visas?
The US government has imposed a fee of $1 million for new H-1B visas for foreign workers.
How will this fee affect Indian IT companies?
It is expected to reduce operating margins by only 10 to 20 basis points, with companies likely passing some costs to clients.
When will this fee take effect?
The new fee structure will be effective from September 21, 2025.
How many Indian employees are on H-1B visas?
The number of Indian employees on H-1B visas working for major IT firms has decreased from 34,507 in 2017 to 17,997 in 2025.
What percentage of revenue do top IT firms generate from the US?
Top IT companies like TCS, Infosys, Wipro, and HCL generate around 53 percent of their revenue from the US market.
