HIRE Bill Could Fire India’s IT from US

A new bill introduced in the U.S. Senate aims to slap a 25% tax on American companies outsourcing work to foreign providers, a move that could deliver a body blow to India's booming information technology industry, which relies heavily on U.S. clients for more than half of its $250 billion in annual exports.

India is already the target of a 50 per cent tariffs threat from Trump over buying Russian crude.

The Halting International Relocation of Employment (HIRE) Act, moved by Republican Sen. Bernie Moreno of Ohio, targets payments made by U.S. firms to overseas entities for services benefiting American consumers. If enacted, it would impose the excise tax on fees, royalties or service charges starting after Dec. 31, 2025, while also barring companies from deducting those costs from their taxable income. Proceeds from the tax would fund a new Domestic Workforce Fund to support U.S. apprenticeship and retraining programs.

"While college grads in America struggle to find work, globalist politicians and C-suite executives have spent decades shipping good-paying jobs overseas in pursuit of slave wages and immense profits — those days are over," Moreno said in a statement announcing the bill on Sept. 6. He added that the measure would "hit them where it hurts: their pocketbooks" to prioritize American workers.

Major Economy Driver and Employer

India's IT sector, a cornerstone of the country's economy that employs millions and drives urban growth in cities like Bengaluru and Hyderabad, stands to lose the most. The U.S. accounts for about 60% of India's software and business process outsourcing exports, valued at roughly $109 billion in fiscal year 2023-24. Major players such as Tata Consultancy Services, Infosys and Wipro derive the bulk of their revenue from American contracts for application development, maintenance and customer support services.

Analysts estimate the combined effect of the 25% tax and lost deductions could inflate outsourcing costs by up to 46% for U.S. buyers, eroding the cost arbitrage that makes Indian providers attractive. "On a simple $100 outsourcing payment, that could mean $25 in excise tax plus about $21 in additional federal income tax at the 21% corporate rate," said one expert in a recent analysis. This could force U.S. firms to rethink offshoring strategies, potentially shifting work to domestic or nearshore alternatives like Mexico or Canada.

The bill's broad language — applying to any "direct or indirect" benefit to U.S. consumers — could include not just traditional IT services but also business process management, call centres and even some global capability centres run by U.S. multinationals in India.

Indian industry leaders expressed concern but tempered it with caution. Several analysts pointed out that the bill faced “several hurdles”. In an interview to finance and business website moneycontrol.com, Arindam Sen of EY Global said that the bill will require a lot of lobbying and voting and that “it seems highly unlikely because this would impact nearly 70 percent of all US corporations”.Shares of top Indian IT firms dipped 1-2% in early trading on Monday following the bill's introduction.

Legal experts also point out potential roadblocks. The measure could clash with World Trade Organization rules prohibiting duties on digital services, a moratorium renewed in 2024 and set for review in 2026. U.S.-India trade agreements, including India's withdrawal of its equalization levy on digital services, might also complicate enforcement. "This would impact nearly 70% of U.S. corporations, so expect significant lobbying pushback," Sen told moneycontrol.com.

For India, the stakes are high. The sector contributes about 8% to GDP and supports over 5 million direct jobs, with ripple effects in education, real estate and services. If passed, the HIRE Act could accelerate diversification efforts already underway, such as expanding into Europe, Japan and domestic markets. Indian IT must stay watchful and prepare for compliance and higher costs, analysts pointed out.

Moreno plans to force a Senate vote next week, testing Republican support in a divided Congress. While passage in its current form seems unlikely, the proposal underscores rising protectionist sentiments, especially among Trump-aligned lawmakers, and signals potential turbulence for bilateral trade ties.