How USD 100K H-1B fees will hit smaller Indian IT firms

Nasscom, India’s IT industry body, has said that the US government’s proclamation introducing a USD 100,000 surcharge on new H-1B petitions represents a major shift in skilled worker policy. While the clarification that this is a one-time fee has eased some uncertainty, the implications remain significant, particularly for mid-tier Indian IT firms whose business models are closely tied to onsite delivery.

Early reactions within the industry ranged from disbelief to rapid damage control. Recruiters paused inbound offers to US clients, account heads held emergency calls with onshore sponsors, and finance teams began recalculating project margins. For firms operating on low-margin onsite contracts, the sudden per-visa cost forced an immediate rethink of US growth plans.

The Fee Is A One-Time Hit, Not An Annual Burden

Subsequent clarifications confirm that the surcharge is a one-time fee, not a recurring annual levy. It applies only to new H-1B petitions filed after the effective date, while existing H-1B holders, renewals, and reentries are not impacted. Nasscom has said this eases uncertainty and gives firms time to recalibrate hiring strategies rather than scramble over immediate contract margins. Still, the prospect of such a large upfront cost changes how firms approach future US expansion.

Why Mid-Sized Firms Feel The Pinch More

Large IT services companies with diversified revenue, healthy cash reserves, and established US entities are more likely to absorb or spread out the additional costs. Smaller players, however, lack that cushion. For many mid-tier service providers, H-1B placements are critical to winning competitive bids, maintaining client relationships, or enabling short-term proofs of concept against local rivals. Startups and SaaS firms at the early internationalisation stage also feel pressure, since the extra cost can stretch go-to-market timelines and delay returns.

Business Models Under Pressure

The change directly alters the economics of onsite delivery. A consultant billed at a client rate, carefully calibrated around prevailing wages and slim margins, now carries a six-figure surcharge. Firms face difficult choices. They can reprice contracts and risk pushback, absorb the cost and narrow their margins, or scale back their onsite presence altogether. For those with ambitious US expansion plans, these adjustments can affect fundraising assumptions, vendor partnerships, and timelines for services that require local presence.

How Companies Are Adapting

Many firms are accelerating local hiring in the US to reduce visa dependence, though this raises baseline operating costs. Others are shifting more work back to Indian delivery centres, leaning on offshore models and remote collaboration, moves that demand client buy-in for service-level and time-zone trade-offs. Investments in automation, low-code platforms, and productivity tools are also being stepped up to offset the need for additional manpower. Some firms are striking subcontracting arrangements with US partners, while industry bodies continue to lobby for waivers and transition carve-outs.

What Lies Ahead For Indian IT

In the short term, smaller firms will likely tighten US hiring, slow expansion, and focus on serving existing clients. Over the medium term, some will double down on offshore and automation capabilities, even at the cost of reduced local presence. Others may accept higher onshore costs and reposition themselves as providers of higher-value consulting rather than cost-driven labour arbitrage. A few may scale back their US ambitions altogether, looking instead to alternative markets or deeper partnerships with US-based companies that can host staff without direct visa exposure.

The broader question is how this policy shapes the future of cross-border collaboration in frontier technologies like artificial intelligence and advanced analytics. Nasscom has consistently stressed that access to high-skill talent is vital for American competitiveness and innovation. If the fee dampens mobility, it could slow progress in precisely the areas where Indo–US collaboration has been strongest.

A Bigger Opportunity For India

Beyond immediate challenges, many see this as a moment for India to take stock and chart a more confident path of its own.

Rahul Garg, Founder and CEO of Moglix, one of Asia’s largest B2B e-commerce and industrial supply chain platforms, explains that this is not just about reacting to US policy shifts but about defining India’s long-term trajectory.

“This is an opportunity for India to pause, reflect and shape its own path with confidence. Our talent has already shown it can compete globally, and now we can direct that energy into building capabilities and frameworks rooted in our own context. The growth of Global Capability Centers, with more than 1,700 in India employing nearly 1.9 million professionals, is one example of what is possible, but the vision must be larger,” he notes.

Garg points out that the task ahead is about creating an ecosystem where India leads in research, design, technology and innovation on its own terms. “To achieve this, we must invest more in research and development, which today is about 0.7 percent of GDP, deepen academia–industry partnerships, and encourage a culture of risk taking and experimentation.”

He adds that the foundations are already in place. “With over 1.5 million engineers graduating each year and a startup ecosystem that has already produced more than 100 unicorns, the direction is clear. If we align these efforts with the right policies and infrastructure, India can build solutions for itself while contributing to the world. This is not just a moment to respond to, it is the beginning of a long-term journey to establish India as a true center of innovation and capability.”