The math behind the shock: $100,000 H-1B fee could cost Indian IT $500 mn

The US government’s plan to impose a $100,000 application fee on fresh H-1B petitions could alter the way Indian IT firms operate in their biggest market. While the change, effective FY27, spares current visa holders and renewals, analysts warn the magnitude of the cost could push companies toward offshore delivery and local U.S. hiring, reducing reliance on the visa programme that once powered India’s IT boom.

The Math Behind the Shock

Today, filing an H-1B typically costs an employer between $2,000 and $5,000 per applicant, depending on company size and additional legal costs. Under the new proposal, the base fee will jump 20x to $100,000 per new application.

To understand the impact:

If an Indian IT services company were to file 5,000 H-1B applications in FY27, the cost would balloon to $500 million (5,000 × $100,000).

By comparison, at the current average cost of $3,000 per visa, the same 5,000 applications would cost just $15 million.

That’s a 33-fold increase in costs, enough to discourage bulk filings altogether.

Motilal Oswal Financial Services notes that “given the magnitude of this fee, Indian IT companies will likely avoid new H-1B filings, opting instead to expand offshore delivery or increase local hiring.”

The brokerage believes that magnitude of the new H-1B visa application fee for fresh petitions - math of which works out to $500 million in case of 5,000 filings - may nudge IT companies to expand offshore delivery or increase local hiring.

What It Means for Indian IT

The Indian IT industry, which earns over 60% of its revenues from the U.S., has already been reducing dependence on H-1Bs over the past decade.

Only about 20% of employees at large Indian IT vendors are currently based on-site in the U.S.

Of these, just 20–30% hold H-1B visas, meaning H-1B holders make up only 3–5% of the total workforce at a typical vendor.

"With localisation drives in the US and higher local hiring, only about 20 per cent of employees are currently based on-site. Of this, 20-30 per cent are on H-1B visas, implying that H-1B holders represent just 3-5 per cent of the active workforce for a typical vendor," Motilal Oswal noted.

If new H-1B filings shrink further, on-site revenues may decline. However, on-site costs would also reduce, and since offshore delivery is more profitable, operating margins could even improve in the medium term, analysts at Motilal Oswal said. The trade-off: topline revenue growth may slow.

If new H-1Bs "vanish", on-site revenues will decline, but so do on-site costs. This shift could improve operating margins, as offshore work tends to be structurally more profitable. The net effect on earnings per share could be neutral in the medium term, although topline growth could be slower, according to it.

Impact on Indian IT Companies

Shift to Offshore Delivery:

Offshore work (done from India or other low-cost centers) is structurally more profitable than on-site work. The huge fee will nudge IT companies to keep more jobs offshore instead of filing H-1Bs.

Increase in Local Hiring in the U.S.:

Instead of bringing Indian employees on H-1Bs, firms may hire U.S. citizens and green card holders, even if costlier per employee, as it avoids the massive upfront visa fees.

Who Uses H-1Bs the Most?

Contrary to perception, it is not just Indian IT firms that depend heavily on H-1Bs. Big Tech companies in the U.S. file more applications than Indian vendors.

According to U.S. Citizenship and Immigration Services (USCIS) data for FY25 (as of June 30, 2025):

Amazon led the approvals list with 10,044 H-1B visas.

TCS was second at 5,505 approvals.

Microsoft (5,189), Meta (5,123), Apple (4,202), and Google (4,181) also figured among the top filers.

Infosys (2,004), LTIMindtree (1,807), and HCL America (1,728) were the other major Indian names.

This indicates that while Indian IT is exposed, global tech giants like Amazon, Microsoft, and Google will also be hit by the fee hike.

On Monday, Nasscom said that US clarification that the H-1B visa fee hike will not affect current visa holders and will apply as a one-time fee only to fresh petitions, helped address the immediate ambiguity surrounding eligibility and timelines. It alleviates concerns on business continuity and uncertainty for H-1B holders that were outside the US, as per the association.

Further, it pointed out that Indian and India-centric companies operating in the US have significantly reduced their dependencies on H-1B visas and are increasing local hirings, and added, given this "we anticipate only a marginal impact for the sector".

"Moreover, with the fee being applicable from 2026 onward, it gives companies time to further step up skilling programmes in US and enhance local hiring," the apex industry body said.

The industry is spending over USD 1 billion on local upskilling and hiring in the US and the number of local hires has increased tremendously.

While some industry experts noted that they foresee no immediate adverse impact over the next 6-12 months as the hike takes effect only in the upcoming application cycle, there were those who, citing back-of-the-envelope calculations and cost add-ups, cautioned that there could be a deferred impact requiring reassessment eventually of business strategies by IT companies, if the rule stays.

Sajai Singh, Partner, JSA Advocates and Solicitors, has emphasised that while the immediate shock has slightly muted, seeming like a huge relief for now, it is just giving more time for the reality to set in.

"The clarifications tweak the applicability to new H-1B visa applicants, not existing visa holders or renewals. This means current H-1B holders can exit and re-enter the US freely without paying the fee; as the fee will apply to the upcoming H-1B lottery cycle. However, Indian IT companies that rely heavily on H-1B visas will still face significant cost increases, potentially disrupting business models and revenue streams," Singh said.

Eventually, all this will bring the focus back on hiring local talent in the US to reduce dependence on H-1B visa holders.

"Net-net, there may be a slight delay in the impact. But the impact will be there, requiring reassessment of business strategies. Yes, the immediate shock has slightly diluted, and so it seems like a huge relief. It's just giving more time for the reality to set in," Singh said.

Strategic Shifts Already Underway

Local hiring push: Indian IT is steadily hiring more U.S. talent.

Reskilling spend: $1+ billion allocated annually on upskilling American employees.

Delivery model tweaks: More subcontracting and hybrid models (part local, part offshore).

Big Picture

If the $100,000 fee stays, H-1B filings from Indian IT may “vanish”, reshaping how outsourcing works.

Short-term: Minimal impact (as fee applies only from FY27).

Medium-term: Shift toward offshore + local hires.

Long-term: The U.S. may see fewer Indian IT professionals on visas, and more locals filling the gap.  With inputs from PTI