Explained: What the US HIRE Bill means for Indian IT

The United States is weighing a proposal that could directly hit India’s $280 billion IT services industry. The Halting International Relocation of Employment (HIRE) Bill, introduced in the Senate by Ohio Republican Senator Bernie Moreno, seeks to penalise outsourcing by imposing a steep tax on payments made to foreign workers for services consumed in the US.

What does the HIRE Bill propose?

The HIRE Bill has three key provisions:

• 25% outsourcing tax: US firms would pay this levy on payments to foreign entities for services benefiting American consumers.


• Ban on deductions: Companies could no longer write off such outsourcing expenses.


• Domestic Workforce Fund: Proceeds would support training and apprenticeships for American workers.

The bill is pitched as a job-protection measure, but analysts warn it could sharply raise costs for US corporations that rely on Indian IT.



Why Indian IT is in the crosshairs

Indian majors—TCS, Infosys, Wipro, HCLTech, and Tech Mahindra—derive 50–65% of their revenue from North America. Fortune 500 firms’ Global Capability Centres in banking, retail, healthcare, and tech also depend on India’s skilled workforce.

If enacted, the tax and loss of deductibility would inflate outsourcing costs. Indian IT firms might absorb part of the hit—squeezing already thin margins—or pass it on to clients, potentially fuelling US inflation.



Industry reaction: unlikely to pass, but caution needed

Experts say the bill faces an uphill battle in Congress. Ganesh Natarajan, Chairman of GTT Data Solutions & 5FWorld, told CNBC-TV18 that it is “very unlikely” the bill will pass in its current form because “every significant corporation in the Fortune 500 has huge investments in India.”

Similarly, Arindam Sen of EY told Moneycontrol that the measure would impact nearly 70% of all US corporations, making its passage improbable. Still, he and others warn that the uncertainty itself could delay new deals and investments in India.

Nikhil Narendran, Partner – TMT at Trilegal, told CNBC-TV18 that while such proposals have surfaced in the past without materialising, “given the current scenario, it’s very difficult to say one way or the other.”



Political backdrop and Trump link

The HIRE Bill comes amid growing protectionist rhetoric in the US. Former Trump trade adviser Peter Navarro has voiced support for taxing remote foreign workers, and MAGA-aligned activists have amplified calls to curb outsourcing to India. Senator Moreno has positioned the bill as a crackdown on “globalist executives” shipping American jobs overseas.

While tariffs traditionally apply to goods, not services, this bill is seen as a legislative attempt to translate campaign rhetoric into policy.



The global trade angle

At present, World Trade Organization (WTO) rules prevent duties on digital services. This moratorium, last renewed in early 2024, will be reviewed in March 2026. India and other countries have previously pushed to end the ban so they can tax digital services, while the US has resisted. This broader debate adds another layer of complexity to the HIRE proposal.



Outlook for Indian IT

For now, most analysts agree the HIRE Bill is unlikely to become law soon. But its introduction reflects a rising tide of economic nationalism in the US that India’s IT firms cannot ignore.

Phil Fersht of HFS Research told Moneycontrol that the bigger challenge is the “uncertainty” such moves generate. Visa restrictions, tariff threats, and protectionist rhetoric could all weigh on outsourcing deals and client sentiment, even if legislation stalls.

The bill may not pass in its current form, but it signals a serious policy threat. With heavy dependence on the US market, Indian IT firms may need to diversify their client base, invest more in Europe and Asia, and prepare for a less predictable geopolitical climate.