Overview
- Former RBI governor Raghuram Rajan warned that a tax on outsourced services is a bigger risk to India than the recent H-1B visa fee increase.
- The HIRE Bill would impose a 25% excise tax on U.S. company payments to foreign persons and disallow related deductions, with proceeds directed to workforce programs.
- Media reports indicate the tax could apply to payments from January 1, 2026 if the bill is enacted by December 31, 2025.
- The proposal covers IT services, BPO, consulting, global capability centers and freelance work, raising costs across a wide swath of cross-border services.
- Rajan said India’s IT industry is especially exposed given heavy U.S. dependence, flagged existing U.S. goods tariffs hurting sectors like textiles, and noted diminishing reliance on H-1B deployments due to virtual work and local hiring.