Another H-1B Shock, and Indian IT Stocks Are Watching Closely

Just when Indian IT investors thought the H-1B story had settled down, it is back in the headlines again. The US Department of Homeland Security has proposed a new fee of $103,265 on H-1B cap-subject petitions, and shares of Infosys, TCS, Tech Mahindra and Wipro are all expected to stay in focus as the news gets digested. This lands at a particularly sensitive moment. IT has been the worst performing sector on the Nifty through 2026, and we have tracked that story closely, from the brief rally when Nifty IT became FPIs' favourite trade again in July to CLSA turning cautious on TCS and Infosys just days ago. A fresh H-1B headline is the last thing this sector needed while it was already trying to find its footing.

What Exactly Is Being Proposed

The proposed fee would apply to H-1B petitions subject to the annual cap, which includes cases eligible for the advanced degree exemption, and it would sit on top of existing H-1B fees rather than replacing them. Certain cap exempt petitions, filed by universities and qualifying nonprofit or government research organisations, would not be covered by this new charge. According to DHS's own estimate, the fee could generate roughly $8.8 billion annually, based on an expected 85,000 H-1B cap subject petitions each year.

It is worth being precise about where things stand right now. This is a notice of proposed rulemaking, not a final rule. It will go through a 30 day public comment period once it is published in the Federal Register, and it can still be modified, delayed, or legally challenged before it actually takes effect. That distinction matters more than headlines usually give it credit for, and it is the first thing worth understanding before deciding how seriously to treat this development.

Déjà Vu: What Happened the Last Time This Played Out

If this sounds familiar, that is because India's IT sector has been through a very similar moment before, just under a year ago. In September 2025, the administration introduced a one time $100,000 fee on H-1B applications through a presidential proclamation, applicable to new petitions filed after September 21. Existing visa holders and renewals were exempt at the time too.

The market reaction back then was sharp and immediate. Nifty IT fell 2.95 percent in a single session, wiping out roughly Rs. 85,496 crore in market capitalisation, its steepest one day fall in nearly six months. Nine of the index's ten constituents closed lower that day. The selling did not stop there either, with IT stocks extending losses for five straight sessions and the index shedding more than 6 percent cumulatively over that stretch. TCS actually touched a 52 week low of around Rs. 2,956.90 during that slide.

September 2025 Fee Shock: Stock-Wise Impact

What eventually happened to that fee is just as relevant as the initial shock. A federal judge later ruled the $100,000 charge unlawful and vacated it nationwide, though the government has since appealed that ruling. This new $103,265 proposal is a genuinely different animal legally, since it is being introduced through formal rulemaking rather than a presidential proclamation, a distinction that could make it considerably harder to challenge or overturn in court compared to its predecessor.

How the Two Proposals Compare

Aspect	Sept 2025 Fee	Aug 2026 Fee
Fee amount	$100,000	$103,265
Legal pathway	Presidential proclamation	Formal rulemaking (DHS notice)
Current status	Ruled unlawful, vacated, under appeal	Proposed, 30-day comment period pending
Market reaction	Nifty IT fell 2.95% in a day, Rs. 85,496 crore wiped out	Stocks in focus, reaction still developing

The Silver Lining: Indian IT's Shrinking H-1B Dependency

It is not all bad news, and this is genuinely worth understanding before assuming the worst. Indian IT services firms have been quietly reducing their reliance on H-1B visas for years now, well before this current round of fee proposals began. TCS, the country's largest IT services firm, cut its H-1B applications from 11,212 in FY21 down to 7,844 by FY24, a reduction of roughly 30 percent over just three years. That trend reflects a broader industry shift toward hiring locally in the US, near shoring work closer to clients, and leaning more heavily on other visa categories and offshore delivery models.

TCS: Falling H-1B Application Volumes

What Analysts Estimated Last Time, and Why It Could Apply Again

When the earlier $100,000 fee was announced, Nomura put out a note estimating that the charge could hit EBIT margins across its coverage universe by 11 to 99 basis points and earnings per share by 0.5 to 6 percent, assuming companies made no changes to their existing operating models. Given the new proposed fee is only marginally higher in absolute terms, a broadly similar order of magnitude impact is plausible if this proposal is finalised in its current form, though the actual effect will depend heavily on how much each company has already reduced its dependence on fresh H-1B hiring versus its FY21 levels.

How This Fits Into 2026's Bigger IT Story

Context matters here more than usual. IT stocks have been the worst performing sector on the Nifty through 2026, down over 19 percent for the year against roughly a 7 percent decline for the benchmark itself. We covered this weakness in detail when looking at why IT stocks slumped after the Accenture guidance cut earlier in the year, and more recently when Nifty IT came under pressure alongside the Kospi's rebound. This H-1B headline is landing on a sector that was already fragile, rather than one riding high, which is part of why the reaction is worth watching closely even though the fee itself remains only a proposal.

It is also worth revisiting how Infosys specifically has been navigating its own transition period, something we broke down in our coverage of the Q1 FY27 results and the company's new CEO settling in. A fresh cost headwind like this one adds one more variable to an already complicated year for the company and its peers, at a time when the broader question of whether IT stocks are actually on the rise in 2026 keeps getting a different answer depending on which week you ask it.

What This Means If You Are Holding or Watching IT Stocks

The most important thing to hold onto here is that nothing is final yet. This is a proposal working its way through a formal rulemaking process, with a comment period still to come and real potential for changes, delays, or legal challenges before it ever takes effect. Overreacting to a headline at this stage would mean treating a draft rule the same way you would treat a signed, enforceable law, and those are genuinely different things.

If you are trying to understand how much weight IT carries in your own portfolio through index exposure, our explainer on the Nifty IT Index and our breakdown of how much of the Nifty 50 is actually driven by IT versus other sectors are both worth revisiting before making any decisions based on this news alone. As always, this is not investment advice, and any changes to your IT sector exposure should be based on your own research, risk tolerance, and how the actual rulemaking process unfolds over the coming weeks, rather than a single day's headline.

Frequently Asked Questions (FAQ)

1. What is the newly proposed H-1B fee?

The US Department of Homeland Security has proposed a $103,265 fee on H-1B cap-subject petitions, in addition to existing H-1B fees, through a formal notice of proposed rulemaking.

2. Is this fee different from the $100,000 fee announced in 2025?

Yes. The 2025 fee was introduced through a presidential proclamation and was later ruled unlawful by a federal judge. This new fee is being proposed through formal rulemaking, a different and potentially more durable legal process.

3. Has this new fee already taken effect?

No. It is currently only a proposal and will go through a 30-day public comment period after publication in the Federal Register, and could still be modified, delayed, or challenged before taking effect.

4. Which Indian IT stocks are most affected?

Infosys, TCS, Tech Mahindra and Wipro are among the stocks expected to remain in focus, given their significant exposure to the US market and historical reliance on H-1B visas.

5. Are Indian IT companies still heavily dependent on H-1B visas?

Dependence has been falling. TCS, for example, reduced its H-1B applications from 11,212 in FY21 to 7,844 in FY24, reflecting a broader industry shift toward local hiring and near-shoring in the US.