H-1B Regulations on India's Offshore Finance and Accounting Market

The latest H-1B visa regulations announced by the Trump administration represent a seismic shift in US immigration policy that will profoundly impact India's offshore finance, accounting, auditing, and tax outsourcing sector. This analysis examines the multifaceted implications of these changes on India's robust outsourcing ecosystem.

Key Regulatory Changes

H-1B Visa Fee Structure Overhaul

The most significant change is the imposition of a $100,000 annual fee for H-1B visa applications, effective September 21, 2025. This represents a staggering 46,400% increase from the previous fee structure of $215-$780. The fee applies specifically to H-1B workers entering the US from abroad, creating an unprecedented financial barrier for companies seeking to bring foreign talent to American operations.

Proposed HIRE Act - Double Impact

Compounding the H-1B restrictions, the proposed Halting International Relocation of Employment (HIRE) Act introduces a 25% excise tax on all outsourcing payments made by US companies to foreign service providers. This legislation, if enacted, would take effect January 1, 2026, and includes provisions that eliminate tax deductibility for such payments, effectively increasing the total cost burden by up to 46%.

Market Scale and Vulnerability

India's Offshore Finance Sector Dominance

India's finance and accounting Business Process Outsourcing (BPO) market generated $2.61 billion in revenue in 2024 and is projected to reach $4.88 billion by 2030, representing an 11% CAGR. The broader accounting services market in India was valued at $25.76 billion in 2024 with projections to reach $65.10 billion by 2033 at a 10.17% CAGR.

Global Capability Centers (GCCs) Impact

India hosts over 1,700 GCCs employing 2.1 million professionals and generating $76 billion in direct output during FY25. These centers contribute $241 billion in total economic activity, representing 2% of India's GDP. Particularly relevant to finance and accounting outsourcing, GCCs now handle 70% of finance functions for their parent organizations.

Immediate Industry Impact Analysis

H-1B Dependency Reduction

Leading Indian IT firms have strategically reduced their H-1B dependency over the past decade. Companies like TCS, Infosys, HCLTech, Wipro, and Tech Mahindra now maintain 20-50% H-1B dependency compared to historical levels exceeding 80%. This proactive diversification has positioned them to weather the current regulatory storm better than anticipated.

Approved H-1B petitions for top seven Indian IT firms dropped 56% between FY15 and FY23 to 6,700 total approvals. Major firms now employ over 50% local staff in the US, significantly reducing visa reliance through increased local hiring, US delivery centers, and enhanced offshore capabilities.

Revenue Exposure Statistics

Indian IT services derive approximately 60% of export revenues from the United States, translating to roughly $150 billion out of the $250 billion sector. For finance and accounting specific services, this represents a substantial portion of the $2.61 billion F&A BPO market, making the sector particularly vulnerable to US policy changes.

Financial Impact Projections

Cost Structure Implications

The new H-1B fee structure will make it prohibitively expensive for most companies to sponsor foreign workers. At $100,000 per visa, the cost now exceeds the annual salary of many entry-level positions in finance and accounting. This effectively eliminates the economic incentive for bringing junior-level professionals to the US for training or project work.

HIRE Act Margin Erosion

If the HIRE Act passes, Indian finance and accounting service providers could face operating margin compression of 500-1000 basis points. Mid-tier firms operating at 12-15% EBIT margins are particularly vulnerable, while larger firms with 20-22% margins may absorb the impact more effectively but will still experience significant erosion.

Client Cost Burden

The combined impact of both regulations could increase total service delivery costs for US clients by 25-46% when factoring in the excise tax and loss of deductibility. This dramatic cost increase may force renegotiation of existing contracts and impact new deal closures.

H-1B Regulations Impact on Indian Offshore Market:

Financial Metrics - Offshore Market Analysis

Strategic Adaptations and Market Evolution

Accelerated Onshore Expansion

The regulatory changes are accelerating the "onshore-offshore" hybrid model adoption. Indian firms are expanding their US operations through acquisitions and local hiring. This shift, already underway, will intensify as companies seek to maintain competitiveness while complying with new regulations.

Enhanced Value Proposition Focus

GCCs and service providers are pivoting from cost arbitrage to value creation. The average GCC professional generates $32,500 in GVA per capita, which is 11 times India's national average and comparable to developed economies like Japan and South Korea. This productivity advantage becomes crucial as cost differentials narrow.

Technology Integration Acceleration

The regulatory pressure is driving increased adoption of AI, machine learning, and robotic process automation in finance and accounting operations. This technological enhancement helps maintain productivity advantages and justifies higher service costs to clients.

Long-term Market Implications

Domestic Market Strengthening

The challenges in the US market are redirecting focus toward India's domestic finance and accounting services sector, which is experiencing robust growth driven by GST compliance requirements, startup ecosystem expansion, and digital transformation initiatives. The domestic market's 10.17% CAGR provides a substantial buffer against US market uncertainties.

Geographic Diversification

Indian service providers are accelerating expansion into Europe, Asia-Pacific, and other markets to reduce dependence on the US. The global finance and accounting BPO market, valued at $54.79 billion in 2025, offers significant diversification opportunities.

Regulatory Arbitrage Limitations

The HIRE Act includes anti-abuse provisions designed to prevent circumvention through transfer pricing arrangements, related parties, or US subsidiaries. This comprehensive approach limits traditional regulatory arbitrage strategies, forcing genuine operational transformation.

Industry Response and Resilience Factors

NASSCOM and Industry Advocacy

India's technology industry body NASSCOM has expressed concerns about the "one-day deadline" implementation and potential disruption to ongoing projects. The organization emphasizes that Indian companies follow all governance and compliance requirements, pay prevailing wages, and contribute significantly to the US economy and innovation ecosystem.

Government Support Mechanisms

The Indian government's Digital India initiative and supportive BPO policies continue to strengthen the sector's infrastructure and capabilities. These initiatives focus on digitization, technology adoption, and skill development to maintain India's competitive advantage.

Market Adaptation Capabilities

The finance and accounting outsourcing sector has demonstrated remarkable resilience and adaptability. The projected growth trajectories for both the F&A BPO market (11% CAGR to 2030) and accounting services market (10.17% CAGR to 2033) suggest underlying strength despite regulatory headwinds.

Conclusion and Outlook

The latest H-1B regulations represent both a significant challenge and an opportunity for India's offshore finance and accounting sector. While the immediate impact includes increased costs and operational complexity, the industry's strategic preparations over the past decade position it well for adaptation.

The sector's evolution from a pure cost arbitrage model to a value-driven, technology-enabled service delivery platform provides resilience against regulatory changes. The continued growth of GCCs, domestic market expansion, and geographic diversification create multiple growth vectors that can offset US market challenges.

However, the potential enactment of the HIRE Act represents a more fundamental threat that could reshape the entire offshore services landscape. Industry participants must continue accelerating their transformation toward higher-value services, increased automation, and expanded global presence to maintain competitiveness in this evolving regulatory environment.

The next 12-18 months will be critical as companies navigate the immediate H-1B fee implementation while preparing for potential additional restrictions under the HIRE Act. Success will depend on operational agility, client relationship strength, and the ability to demonstrate clear value propositions that justify higher service costs in the new regulatory reality.

abhi.yadav@whitecrownconsulting.com