BENGALURU, India: India's vast IT industry is bracing for prolonged uncertainty as U.S. lawmakers debate a proposed 25 percent tax on American firms that outsource work abroad, analysts and legal experts said. Customers are already delaying or renegotiating contracts, raising fresh concerns in a sector long dependent on the U.S. market.

Though considered unlikely to pass in its current form, the measure signals a potential shift in how major U.S. corporations—the largest buyers of outsourced IT services—may structure future contracts. If enacted, companies heavily reliant on overseas providers would face new costs, experts said, setting the stage for lobbying campaigns and legal disputes.

India's US$283 billion IT services sector, which contributes more than seven percent of GDP, has flourished for over thirty years by exporting software and back-office services. Its client list includes Apple, American Express, Cisco, Citigroup, FedEx, and Home Depot. But it has also faced political backlash abroad, particularly in the U.S., over the loss of domestic jobs to lower-cost workers in India.

Last week, Republican Senator Bernie Moreno introduced the HIRE Act, which proposes taxing companies that employ foreign workers instead of Americans, with the revenue directed toward domestic workforce development. The bill would also prevent outsourcing costs from being claimed as tax-deductible expenses.

The timing is particularly tough for Indian IT firms. Already grappling with weak revenue growth as U.S. clients cut back on discretionary tech spending due to inflation and trade uncertainty, they now face the prospect of new restrictions in their largest market.

Despite skepticism about the bill's viability, the idea is drawing support. White House trade adviser Peter Navarro recently reposted a call from far-right activist Jack Posobiec urging tariffs on services as well as goods.

India's top IT firms — Tata Consultancy Services, Infosys, HCLTech, Tech Mahindra, Wipro, and LTIMindtree—and industry body Nasscom have so far declined to comment on the potential fallout. Analysts say companies will likely mount an aggressive lobbying effort and pursue legal challenges if the legislation advances.

While experts believe sweeping restrictions will be difficult to enforce, the bill could have far-reaching consequences for U.S. corporations' global capability centres (GCCs). Once seen as low-cost offshore back offices, these centres have evolved into high-value hubs driving research, innovation, finance, and operational support.