Donald Trump's recent decision to impose a $100,000 fee for H-1B visa applications is raising concerns among Indian tech firms that rely on these visas for U.S. projects. This move is expected to significantly affect the profit margins of Indian outsourcing companies, which deploy engineers to client sites in the United States. The change comes at a challenging time for India's $280 billion IT services sector, which is already facing sluggish growth due to reduced technology spending amid geopolitical tensions and tariffs.

The new visa policy adds strain to the India-U.S. relationship, coinciding with an upcoming visit by an Indian delegation to Washington aimed at advancing trade discussions. It also reflects a broader global trend of increasing anti-immigration sentiment. Chander Prakash Gurnani, former CEO of Tech Mahindra and current head of an AI firm, described the situation as a "geopolitical turf war," stating, "The messaging is — foreign students are not welcome, foreign workers are not welcome, we will impose whatever rules we want and we will not be consistent with them."

The H-1B visa program is crucial for both Indian outsourcing firms and the U.S. tech sector, allowing them to bring skilled workers from abroad. The program typically offers 65,000 visas through a lottery system, with an additional 20,000 reserved for U.S. master's graduates. In 2025, over 470,000 applications were submitted, with many companies submitting multiple entries to increase their chances of selection.

The new fee will be added to existing costs, which currently include a $215 registration fee for the lottery and various filing fees. Indian nationals made up 72.3% of all H-1B beneficiaries in the U.S. for the fiscal year ending September 2023. For instance, Infosys Ltd. received approval for 2,504 H-1B visas for fiscal year 2024, which under the new rules would incur a cost of at least $250 million.

Indian Commerce and Industry Minister Piyush Goyal previously indicated that immigration rules had not been a topic in U.S. trade discussions. Following Trump's announcement, opposition lawmakers in India criticized Prime Minister Narendra Modi's government for failing to safeguard Indian interests. In a recent address, Modi discussed tax reductions but did not address the visa fee increase.

India's foreign ministry stated that consultations between the local tech industry and U.S. officials are expected to determine the way forward. While Trump aims to protect American jobs by limiting immigration, experts warn that the new rules could inadvertently increase costs for U.S. companies, potentially leading them to expand their global capability centers in India. Major corporations like Microsoft, Google, and Goldman Sachs already operate large centers in India.

Bhaskar Rao, CEO of Digital Sea, noted, "If American companies cannot outsource onshore, they may look to expand their offshore presence in places like India, even with a possible fee hit." He added that the decision appears aimed at appeasing Trump's voter base, but it remains uncertain whether U.S. companies can replace the junior and mid-level professionals affected by the H-1B cap.

The order, effective immediately, has drawn criticism for potentially violating U.S. immigration law and may lead to legal challenges. The ambiguity surrounding the new rules has prompted major beneficiaries of the H-1B program, such as Microsoft and Alphabet, to caution employees against foreign travel. Arup Raha, an independent economist based in Singapore, expressed concern about the uncertainty created by such decisions, stating, "Such a supply-side shock isn’t in U.S. interests either."

Indian firms like Tata Consultancy Services, Infosys, and HCL Tech have been reducing their reliance on H-1B visas since Trump first proposed stricter immigration policies. Many projects shifted to remote work during the pandemic, and companies have increased local hiring and established delivery centers in the U.S. Despite these adjustments, the H-1B visa remains vital for maintaining client relationships and managing sensitive projects in the U.S. The increased costs associated with the new visa rules may further limit the number of workers Indian firms can send to client sites.