The Indian IT industry entered a fresh hellscape last week.

Citing misuse and tech layoffs among locals in the US, Washington decided to wield a wrecking bar by raising the H-1B visa fee by 50x, from just about $2,000 to $100,000.

Historically, H-1B visas have always been a lightning rod for the Indian IT sector. But the staggering increase in fee confirmed that the price-arbitrage party was well over. The move, ironically, coincided with Prime Minister Narendra Modi's 'bachat Utsav', urging price-conscious Indians to favour swadeshi products and drive demand.

Of the 11 temporary US worker visa categories, H-1B is the widely accessed non-immigrant visa and India happens to be its largest beneficiary, accounting for over 70% every year, which is roughly three-quarters of all approved visas, while China is a distant second at 11.7%.  

According to the US Citizenship and Immigration Services (USCIS), the new visa fee, which came into effect on Sunday, is a one-time charge for new petitions and does not affect current visa holders, providing relief to thousands of Indian professionals working in the US.

Responding to President Donald Trump's new salvo, the Indian government said the move could have potential humanitarian consequences. The industry feels it'll hamper the free flow of Indian professionals, while analysts expect the impact to be rather limited with no immediate earnings risk. However, higher onsite wage costs could affect FY27 profitability.

The H-1B is a non-immigrant visa that allows hiring of foreign workers in specialized roles, such as IT, engineering, medicine and science. It's typically issued for three years, extendable to six, and importantly, it serves as a stepping stone to acquire a green card, which offers permanent US residency.

Until Saturday, the fee ranged between $2,000 and $5,000 per petition, but given the unreasonable increase, companies are expected to file fewer H-1B applications and instead consider alternatives such as higher offshoring, nearshoring and local hiring.

As for Indian companies, trade body Nasscom said the impact will be marginal, as Indian and India-centric firms operating in Washington have significantly reduced their reliance on H-1B visas and steadily increased local hiring. As per available data, H-1B visas issued to leading Indian and India-centric companies have decreased from 12,792 in 2015 to 10,162 in 2024, it reasoned.

Further, stating the reasons for the marginal impact on the sector, Nasscom said H-1B workers among the top 10 Indian companies account for less than 1% of their entire employee base.

So who's benefiting from H-1Bs?

Turns out, it's the BigTech, led by companies like Google, Amazon, Microsoft and Meta, who are hiring more Indian workers. For instance, Amazon is the company that received the most H-1B worker visas approved each year since 2020. Likewise, Google, Microsoft and others have been accessing the visa programme more actively than Indian IT.

Besides actively dipping into the visa pool, there have been concerns about companies misusing the system. For instance, USCIS raised red flags last year after it received more eligible multiple registrations than single registrations. In fact, highlighting cases of American companies laying off domestic tech employees, the White House last Saturday listed out instances of several erring firms.

One company was approved for 5,189 H-1B workers in FY25, while laying off roughly 16,000 US employees this year. Another received approval for 1,698 H-1B workers in FY25, but laid off 2,400 US workers in Oregon in July. A third company reduced its US workforce by 27,000 since 2022, while obtaining 25,075 H-1B approvals. Yet another firm reportedly cut 1,000 US jobs in February, despite receiving 1,137 H-1B approvals for FY25.

There's no evidence that companies firing local employees are doing so to replace them with foreign workers. Industry watchers also argue that BigTech and startups hire a lot of H-1Bs because local talent is simply unavailable. But opponents argue that companies have used the H-1B visa to import foreign workers at below-market wages, distorting the labour market dynamics.

Slice it anyway, Trump's abrupt visa hike is to primarily bust baddies back home than a deliberate attempt to beat rival Indian firms. Regardless of whether the move will affect US or Indian firms more, the question is if companies will continue applying for H-1Bs at such a steep price tag? It seems unlikely going by numbers.

Available data shows that H-1B workers aren't cheap labour. According to a 2025 report by the US Citizenship and Immigration Services, the median wage for initial employment under the H1B visa programme was $97,000. So a blanket $100,000 fee for large-scale hiring will raise costs significantly.

Analysts believe that this may lead IT firms to increase offshore work, which is likely to benefit Indian companies. Besides, companies can also explore options such as the L-1 visa option, which has no recruitment limitations. 

Foreign workers fill a critical need in the US labour market -- particularly in the science, technology, engineering, and mathematics fields. Every year, US employers seeking highly skilled foreign professionals compete for the pool of H-1B visa numbers for which USCIS controls the allocation. With a low statutory limit of visas available, demand has outstripped supply in recent years, and the visa cap has been reached before the year ends.

But Trump and his team often accuse Indians of replacing American workers, creating an economic and national security threat to the nation. H-1B visas for Indians shot up from 32% in FY2003 to over 70% in recent years, which prompted Trump to go easy on approvals.

For instance, under Trump 1.0, USCIS denied a larger percentage of H-1B petitions than in the preceding four years. Denials of new H-1B petitions for initial employment rose from 6% in FY15 to a high of 24% in FY18, before dropping to 21% in FY19, 13% in FY20, 4% in FY21, and only 2% in FY2022 -- the lowest denial rates ever recorded. The denial rate for petitions for continuing employment was 2% in both FY22 and FY21, down from 7% in FY20 and 12% in both FY18 and FY19.

Though the backlash is apparent and rising, there's a contrary viewpoint that immigrant workers create new job opportunities for locals. How?

First, according to American Immigration Council, immigrant workers and native-born workers often have different skill sets, meaning that they fill different types of jobs. As a result, they complement each other in the labour market rather than competing for the same job. Second, immigrant workers spend and invest their wages in the US economy increasing demand and creating jobs.

A study also found that, between 2005 and 2018, an increase in the share of workers within a particular occupation who were H-1B visa holders was associated with a decrease in the unemployment rate within that occupation. Another study found that restrictions on H-1B visas such as rising denial rates motivate US-based multinational corporations to decrease the number of jobs they offer in this country.

Meanwhile, it's likely that the prohibitive $100,000 fee on H-1B visas may not uproot India's $283-billion IT sector, but an even bigger shock could be in store, thanks to the proposal of 25% tax on US firms' payments to foreign outsourcing companies. So far, it's only a proposed legislation, introduced in the US Senate this month, but if it's passed and becomes an Act, Indian IT may run into a financial ditch.

(The story is written by Sunitha Natti)