File photo/ ANI

India's information technology (IT) and information technology enabled services (ITeS) sectors have long been among the strongest pillars of the country’s growth story. According to NASSCOM’s Annual Strategic Review 2025, the sector generated export revenues of US$224.4 billion in FY 2024-25, employing over 5.8 million people.

The US market historically accounts for more than half of this revenue, underscoring how deeply India’s outsourcing industry depends on American demand. Against this backdrop, the US Senate’s proposal of the Halting International Relocation of Employment Act (HIRE Act) could significantly reshape the contours of India’s IT and ITeS industry.

At its core, the HIRE Act—still at the bill stage—seeks to discourage outsourcing by making it more expensive for US businesses to send work abroad. It proposes an amendment to the Internal Revenue Code of 1986 to impose a non-deductible 25% excise tax on outsourcing payments. Unlike an income tax, which is levied on profits, this excise tax applies to transactions themselves. In other words, the cost is incurred at the point of payment, regardless of profitability, making outsourcing structurally less attractive for US corporations.

The legislation defines “outsourcing payments” broadly to cover any premium, fee, royalty, service charge, or other business payment made to a foreign entity for labour or services benefiting US consumers—directly or indirectly. The inclusion of “indirectly” is...

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