U.S. H-1B Visa Fee Increase: Implications for Indian IT Firms
In a significant policy shift, the U.S. government has mandated a one-time fee of $100,000 for new H-1B visa applicants. This decision, effective from September 21, 2025, is expected to have nuanced implications for Indian IT services firms, particularly large and mid-cap companies. A recent report from Equirus, a fund management firm, suggests that while the fee may pose challenges, it is unlikely to severely impact the operational margins of these firms.
Understanding the H-1B Visa Landscape
The H-1B visa program has long been a cornerstone for technology companies in the United States, allowing them to hire skilled foreign workers, particularly in specialized fields like IT. Historically, a significant proportion of H-1B visa holders-approximately 71%-are from India, with major firms such as Infosys, Wipro, Cognizant, and Tata Consultancy Services relying heavily on this workforce. The visa program has facilitated the growth of these companies, enabling them to tap into a global talent pool.
Financial Implications of the New Fee
Equirus’s analysis indicates that the new fee will have a minimal effect on the profit margins of large-cap IT firms, potentially reducing them by only 7 to 14 basis points if the fee applies solely to new applicants. However, if the fee extends to both new and existing visa holders, the impact could rise to between 26 and 49 basis points. Mid-cap firms may face slightly more significant challenges, with potential margin reductions ranging from 21 to 39 basis points for new applicants and 60 to 109 basis points if the fee applies broadly.
Strategic Responses from Indian IT Firms
The report highlights that Indian IT vendors have already been adapting to changing visa regulations over the past several years. Many firms have reduced their reliance on H-1B visas, with these visas now constituting about 25-35% of the workforce for large-cap companies and 30-60% for mid-cap firms. This shift suggests that the industry has been preparing for such regulatory changes, allowing for a smoother transition in response to the new fee.
Equirus posits that firms can mitigate the impact of the fee through various strategies, including increased local hiring, subcontracting, and offshoring. The report emphasizes that the fee, in many cases, exceeds the salaries of H-1B visa holders, making it a significant financial consideration for companies.
Historical Context and Future Outlook
The introduction of the $100,000 fee can be viewed in the context of broader immigration reforms in the U.S. Over the years, the H-1B program has faced scrutiny, with various administrations proposing changes aimed at protecting domestic jobs. The current fee structure reflects ongoing tensions between the need for skilled labor and the desire to prioritize American workers.
Despite the immediate challenges posed by the new fee, Equirus suggests that the overall sales growth for Indian IT firms may experience a slight deceleration in the latter half of fiscal 2026. This slowdown could be attributed to the necessary adjustments firms will need to make in response to the new regulations, which may require careful planning and client approvals.
Conclusion
The U.S. government’s decision to impose a $100,000 fee on new H-1B visa applicants marks a pivotal moment for Indian IT firms. While the financial implications may be manageable for large and mid-cap companies, the industry must remain agile in adapting to these changes. As firms explore alternative strategies to maintain their workforce and operational efficiency, the long-term effects of this policy shift will unfold in the coming years. The resilience of the Indian IT sector, coupled with its historical adaptability, will be crucial in navigating this new landscape.
