US Proposes 25% Outsourcing Tax Threatening India IT Sector

The U.S. HIRE Act, introduced by Republican Senator Bernie Moreno, proposes a 25% tax on American companies that outsource jobs overseas, particularly targeting firms that hire foreign workers instead of Americans. This bill also seeks to prevent companies from claiming outsourcing expenses as tax-deductible, with revenues directed toward U.S. workforce development, sparking concern among India's $283 billion IT sector, which heavily depends on U.S. clients. Experts warn that combined taxes could effectively reach up to 60%, prompting delays, renegotiations, and demands for greater delivery flexibility from U.S. firms reliant on Indian IT providers such as TCS, Infosys, and Wipro. The proposal arrives amid already weak revenue growth for Indian IT due to inflation and tariff concerns, and it could impact global capability centers and innovation hubs in India. While the bill faces slim chances of passing in its current form and requires White House support, it has gained traction amid growing political pressure to reduce reliance on foreign outsourcing. Industry analysts anticipate strong resistance from American corporations through lobbying and legal challenges, with the potential for a diluted or delayed implementation of the tax.