US HIRE Act Could Disrupt $250-Billion Indian IT Industry
US HIRE Act: US Bill Threatens Indian IT Services with 25% Outsourcing Tax
Indian information technology (IT) services companies, the backbone of the country’s employment and a major global force in outsourcing, are facing fresh uncertainty from a new US bill. On September 5, Ohio Senator Bernie Moreno introduced the Halting International Relocation of Employment (HIRE) Act in the US Senate, sparking debate on its potential impact on India’s $250-billion IT industry.
What is the US HIRE Act?
The HIRE Act proposes a 25% tax on payments made to foreign companies for services provided to US individuals or firms, effective December 31, 2025. Importantly, these payments will no longer be tax-deductible for US businesses, amplifying the financial burden on companies relying on outsourced services.
Funds collected from this tax would go into a new Domestic Workforce Fund, designed to strengthen apprenticeship programs and expand workforce development initiatives across America.
According to Moreno, the measure is aimed at “protecting American workers from outsourcing” by discouraging US corporations from moving jobs overseas in search of cheaper labor.
Why Indian IT Services are Most Exposed
The proposed tax carries significant implications for Indian IT services, which generate over 60% of their revenue from the US market. Industry giants like Infosys, Wipro, HCLTech, and Tata Consultancy Services (TCS) have long thrived on providing cost-effective technology and consulting solutions to US corporations.
If enacted, the HIRE Act would force American companies to spend more on outsourcing. To preserve margins, Indian IT firms would either need to raise their billing rates or absorb a hit to profitability. Notably, four of India’s top five IT firms, except TCS, reported improved operating margins in FY25—gains that could quickly erode under a higher tax regime.
US HIRE Act: Challenges for the US Tech Workforce
While the HIRE Act seeks to boost domestic employment, the reality on the ground presents challenges. The US currently faces a shortage of skilled tech talent, compelling businesses to depend on global outsourcing partners.
According to US Citizenship and Immigration Services, India’s 10 largest IT firms employed 14,652 H-1B visa workers in the US as of June 2025. These roles are often critical for project delivery, highlighting the reliance of American companies on overseas expertise.
Without a sufficient domestic talent pipeline, businesses may struggle to meet their digital transformation goals if outsourcing becomes less financially viable.
Will the HIRE Act Become Law?
The bill must pass through the House of Representatives, the Senate, and secure Presidential approval before becoming law. However, experts believe it may face strong resistance.
Large US corporations, heavily dependent on Indian IT services, are expected to lobby against the bill. They argue that higher outsourcing costs would not only dent profits but also slow innovation and technology adoption in the US.
What Experts Are Saying
Analysts are skeptical about the likelihood of the HIRE Act passing with its current 25% tax rate.
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Ashutosh Sharma, VP at Forrester Research, noted:
“A 25% tax directly impacts every US corporation. If it does move forward, the eventual rate could be negotiated lower. For IT firms, this will become a matter of renegotiating contracts and adjusting service costs.” -
Pramod Gubbi, founder of Marcellus Investment Managers, added:
“The cost of service delivery will undoubtedly rise, and IT margins will feel the squeeze. With growth already hard to come by, the bargaining power lies more with the US customer than the Indian provider.”
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