A new legislative proposal in the United States, known as the HIRE Act, has stirred concern across India’s IT industry by targeting outsourcing with steep new costs. The plan seeks to impose a 25% excise tax on payments that U.S. companies make to foreign entities for services benefiting American consumers. In addition, the bill aims to eliminate tax deductions for such payments, making outsourcing markedly more expensive.
For India’s huge information technology and services companies, which derive a large portion of their revenue from U.S. clients, the repercussions could be significant. Many firms are closely watching the bill’s progress and reassessing contracts. U.S. corporations relying heavily on Indian talent may delay deals or renegotiate terms to account for the added cost.
The proposal also includes establishing a “Domestic Workforce Fund,” using revenue from the outsourcing tax to support training, workforce development, and apprenticeships within the United States. Experts believe this could shift how American businesses procure IT and business process services—potentially moving away from low-cost outsourcing and toward more onshore work.
Although the bill faces several hurdles—political negotiation, possible dilution, and legal challenges—it sends a strong signal of growing protectionism. Indian tech companies are now urged to diversify markets, focus on higher-value services, and adapt to a changing international business environment.
