US H-1B Visa Fee Increase to Trim Indian IT Firms’ Margins

The recent decision by the United States to impose a new fee of USD 100,000 on new H-1B visas is set to have a minimal impact on the profit margins of Indian IT companies, according to a report by Crisil Intelligence. The anticipated reduction in profit margins is estimated to be just 0.20 percent, reflecting a significant shift in the operational strategies of these firms over recent years.

Since 2017, reliance on H-1B visas has decreased dramatically, halving as companies have increasingly turned to offshore delivery and local hiring within the US. This trend is further underscored by the fact that the denial rates for H-1B applications surged to 24 percent in 2018, prompting firms to adapt their workforce strategies. Crisil noted that this fee increase is expected to cut operating margins of Indian IT services companies, which had margins of 22 percent in fiscal year 2025, by approximately 10-20 basis points.

Changing Landscape of IT Employment

The report from Crisil highlights that Indian IT giants such as TCS, Infosys, Wipro, and HCL Technologies have significantly reduced their dependence on H-1B visas. The number of Indian employees on H-1B visas employed by these firms decreased from 34,507 in 2017 to just 17,997 by 2025. This shift has been accompanied by a broader strategy of expanding offshore capabilities and hiring talent locally, which has become increasingly critical as visa denial rates have fluctuated.

Crisil’s report indicates that the new fee structure could lead to an increase in visa-related costs, potentially rising to 1 percent of total employee costs if the current proportion of initial employment remains consistent. If this share decreases, costs are expected to stabilize at 0.3-0.6 percent of total employee expenses. Currently, H-1B visa expenses constitute only 0.02-0.05 percent of total employee costs, with individual fees ranging between USD 2,000 and USD 5,000.

Implications for the IT Sector and Beyond

The Indian IT services industry is projected to generate revenues between USD 143 billion and USD 145 billion for the fiscal year. This represents a modest growth rate of 2-4 percent compared to the previous fiscal year. Analysts predict that growth may plateau or remain marginal in the subsequent year, influenced by various factors, including the rising costs associated with the new visa fees.

The US market is particularly crucial for Indian IT firms, accounting for 53 percent of their revenue, with international markets making up 96 percent of total revenue. Last year, the industry exported services worth USD 119 billion. Additionally, India remains the top recipient of global remittances, with USD 118.7 billion received in FY24, of which approximately 23 percent originated from the US. The increase in visa fees may hinder remittance inflows over time, further impacting the economic dynamics between the two nations.

As the Indian IT sector navigates this new landscape, the implications of the H-1B visa fee increase extend beyond profit margins. Firms may accelerate offshoring strategies and reconsider their hiring practices, while prospective students looking to study in the US may find the landscape less appealing. The ongoing changes in visa policies are poised to shape the future of the IT industry, influencing both operational costs and workforce strategies.