{"id":1302272,"date":"2025-11-06T13:12:03","date_gmt":"2025-11-06T07:42:03","guid":{"rendered":"https:\/\/trak.in\/stories\/?p=1302272"},"modified":"2025-11-06T13:12:34","modified_gmt":"2025-11-06T07:42:34","slug":"us-govt-wants-25-tax-on-outsourcing-payments-move-to-kill-outsourcing","status":"publish","type":"post","link":"https:\/\/trak.in\/stories\/us-govt-wants-25-tax-on-outsourcing-payments-move-to-kill-outsourcing\/","title":{"rendered":"US Govt Wants 25% Tax On Outsourcing Payments: Move To Kill Outsourcing?"},"content":{"rendered":"\n<p>Former Reserve Bank of India (RBI) Governor <strong>Raghuram Rajan<\/strong> has sounded a serious warning about the potential fallout from the proposed <strong>HIRE Act<\/strong>, a US legislative move aimed at penalizing outsourcing and offshoring. In an interview with <em>DeKoder<\/em>, Rajan <a href=\"https:\/\/www.financialexpress.com\/business\/investing-abroad-new-us-bill-proposes-25-tax-on-foreign-outsourcing-payments-hire-act-4031646\/\">said<\/a> the <strong>economic impact of this bill could far exceed<\/strong> the recently imposed <strong>$100,000 H-1B visa filing fee<\/strong> for employers of foreign talent.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"545\" src=\"https:\/\/trak.in\/stories\/wp-content\/uploads\/2025\/11\/Screenshot-2025-07-01-at-12.54.04-PM-1024x545-1.png\" alt=\"\" class=\"wp-image-1302281\" srcset=\"https:\/\/trak.in\/stories\/wp-content\/uploads\/2025\/11\/Screenshot-2025-07-01-at-12.54.04-PM-1024x545-1.png 1024w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2025\/11\/Screenshot-2025-07-01-at-12.54.04-PM-1024x545-1-300x160.png 300w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2025\/11\/Screenshot-2025-07-01-at-12.54.04-PM-1024x545-1-768x409.png 768w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What the HIRE Act Proposes<\/strong><\/h3>\n\n\n\n<p>Introduced by <strong>Senator Bernie Moreno<\/strong>, the <strong>HIRE (Help In Rebuilding Employment) Act<\/strong> seeks to <strong>discourage US companies from hiring cheaper overseas labor<\/strong> by taxing such arrangements. The bill proposes a <strong>25% tax on outsourcing payments<\/strong> made to foreign workers or firms if their work benefits US consumers.<\/p>\n\n\n\n<p>It also prevents US firms from claiming <strong>tax deductions<\/strong> for these payments, making the <a href=\"https:\/\/www.financialexpress.com\/business\/investing-abroad-new-us-bill-proposes-25-tax-on-foreign-outsourcing-payments-hire-act-4031646\/\">cost<\/a> of offshoring significantly higher.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How It Works<\/strong><\/h3>\n\n\n\n<p>The HIRE Act defines an <strong>\u201coutsourcing payment\u201d<\/strong> as any fee, premium, service charge, or royalty paid by a US company to a foreign entity for work that benefits American consumers.<\/p>\n\n\n\n<p>This means even if a US-based business contracts an Indian IT firm or call center to serve US clients, the <strong>US company will now face a 25% tax penalty<\/strong> on that payment.<\/p>\n\n\n\n<p>Rajan cautioned that this effectively <strong>extends Trump-era tariffs from goods to services<\/strong>, marking a major policy shift that could damage India\u2019s export-driven IT sector.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Impact on India\u2019s IT and BPO Industry<\/strong><\/h3>\n\n\n\n<p>If passed, the HIRE Act could significantly disrupt the global outsourcing model. India\u2019s <strong>$250+ billion IT services industry<\/strong>, led by companies like <strong>TCS, Infosys, and Wipro<\/strong>, could face reduced demand from US clients, who account for <strong>60\u201370%<\/strong> of their business.<\/p>\n\n\n\n<p>Consulting firms, back-office operations, and BPOs handling American contracts would also be affected, as outsourcing becomes less financially viable for US corporations.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Beyond H-1B: A Structural Shift in US Hiring Policy<\/strong><\/h3>\n\n\n\n<p>Rajan emphasized that while the <strong>H-1B visa fee<\/strong> hurts individual workers, the <strong>HIRE Act<\/strong> threatens the <strong>entire outsourcing ecosystem<\/strong>, forcing US companies to <strong>hire domestically<\/strong> or invest more in automation.<\/p>\n\n\n\n<p>If enacted, the law will apply to all payments made <strong>after December 31, 2025<\/strong>, signaling a <strong>long-term structural shift<\/strong> in how US firms engage global talent.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Rajan\u2019s Warning for India<\/strong><\/h3>\n\n\n\n<p>Rajan said India must closely monitor this development, as the HIRE Act could \u201creshape the economics of global outsourcing.\u201d<br>He urged policymakers to <strong>diversify export markets<\/strong>, <strong>invest in local digital capabilities<\/strong>, and <strong>strengthen domestic employment opportunities<\/strong> to offset potential revenue losses from the US market.<\/p>\n\n\n\n<p>If the bill passes, India\u2019s tech sector \u2014 once the world\u2019s outsourcing powerhouse \u2014 may need to reinvent its global strategy to adapt to a protectionist US environment.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Former Reserve Bank of India (RBI) Governor Raghuram Rajan has sounded a serious warning about the potential fallout from the proposed HIRE Act, a US legislative move aimed at penalizing outsourcing and offshoring. In an interview with DeKoder, Rajan said the economic impact of this bill could far exceed the recently imposed $100,000 H-1B visa [&hellip;]<\/p>\n","protected":false},"author":30,"featured_media":1302281,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[329],"class_list":["post-1302272","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-usa"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>US Govt Wants 25% Tax On Outsourcing Payments: Move To Kill Outsourcing? - Trak.in - Indian Business of Tech, Mobile &amp; Startups<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/trak.in\/stories\/us-govt-wants-25-tax-on-outsourcing-payments-move-to-kill-outsourcing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"US Govt Wants 25% Tax On Outsourcing Payments: Move To Kill Outsourcing? - Trak.in - Indian Business of Tech, Mobile &amp; Startups\" \/>\n<meta property=\"og:description\" content=\"Former Reserve Bank of India (RBI) Governor Raghuram Rajan has sounded a serious warning about the potential fallout from the proposed HIRE Act, a US legislative move aimed at penalizing outsourcing and offshoring. 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