INDIA — U.S. companies allowed some H-1B workers stuck in India to keep working remotely as visa-stamping delays stretch into 2026, a workaround that tax and legal experts warned could expose employers to large Indian tax bills.
Extended India-based work by staff on U.S. payroll can trigger “permanent establishment” exposure under Indian tax law, the experts said, creating a taxable presence for the employer and bringing corporate income tax, compliance and reporting obligations.
Amazon and other major employers have permitted remote work from India as thousands of H-1B holders wait for U.S. consular interviews that have been postponed, keeping many workers abroad even though their jobs require them to return to the U.S. to comply with H-1B status requirements.
The risk centers on whether Indian authorities view the employer as having established a business footprint in India because a worker performs company work while located there, particularly when remote work extends beyond occasional travel or short stays.
Thousands of H-1B visa holders, especially Indian nationals, traveled to India for stamping renewal interviews starting in late 2025, and then found appointments pushed into 2026 amid enhanced social-media screening policies and long backlogs.
To maintain productivity and payroll continuity, employers have leaned on remote work arrangements from India, specialists said, even as that approach can create corporate and withholding tax exposure if India deems the activity to establish a taxable presence.
Tax professionals warned employers to track how long individuals work from India and what they do there, because extended periods performing core business activities can draw scrutiny under Indian rules.
One concern involves profit attribution. Once authorities deem a permanent establishment exists, the employer can face corporate income tax on profits attributed to that presence, along with compliance and reporting requirements under Indian law and the U.S.–India Income Tax Treaty.
The same work arrangement can create additional obligations. Employers may trigger payroll and corporate filings in India, and wages paid for work performed in India may fall under Indian income tax rules instead of or in addition to U.S. rules.
Treaty protections can shape the final outcome but do not eliminate the need for documentation and compliance. Specialists said employers seeking treaty benefits must support the position with careful records, adding to administrative burden.
The ongoing delays have collided with shifting U.S. immigration policies that officials described as tightening scrutiny while steering the H-1B program toward higher-paid roles.
DHS finalized a H-1B Weighted Selection Rule effective Feb. 27, 2026, replacing the random H-1B lottery with a weighted process that assigns more entries to higher-wage applicants. Under the system, applicants in the highest Department of Labor wage category, Level IV, receive four entries, while Level I applicants receive only one.
“The existing random selection process of H-1B registrations was exploited and abused by U.S. employers who were primarily seeking to import foreign workers at lower wages than they would pay American workers. The new weighted selection will better serve Congress’ intent for the H-1B program and strengthen America’s competitiveness by incentivizing American employers to petition for higher-paid, higher-skilled foreign workers,”
Matthew Tragesser, USCIS spokesman, made the statement.
“As part of the Trump Administration’s commitment to H-1B reform, we will continue to demand more from both employers and aliens so as not to undercut American workers and to put America first.”
At the same time, employers face a steep new cost when the worker is outside the U.S. A Presidential Proclamation issued in September 2025 requires employers filing new H-1B petitions for workers abroad to pay an additional $100,000 fee per visa, a measure upheld by a federal district court in December 2025.
Security screening has also slowed consular processing. The State Department implemented mandatory manual social media screening for all employment-based visa categories in mid-Dec. 2025, adding 12–15 minutes of review per file and contributing to the backlog.
President Trump’s Presidential Proclamation 10998 took effect Jan. 1, 2026, restricting or limiting entry for nationals of approximately 39 to 75 countries identified as having “deficient” screening protocols. Valid visa holders are generally exempt, but new issuances face heightened scrutiny and potential suspension.
In India, the backlog has grown severe. As of January 27, 2026, all five U.S. consulates in India — New Delhi, Mumbai, Chennai, Hyderabad, and Kolkata — showed “No Availability” for regular H-1B interview slots for the remainder of 2026, with the earliest regular appointments pushed to April and May 2027.
Indians historically account for over 70% of all H-1B visas issued annually, making the bottleneck especially disruptive for India-linked employers, staffing pipelines and families waiting to return.
Consular interview capacity has been cut by nearly 50% due to the new manual vetting requirements, compounding the delays as more workers cycle through renewals.
Tax specialists focused on how long the remote arrangement lasts and whether the employee performs core business functions. Under Indian tax law, if an employee performs core business activities in India for a foreign employer for more than 90 days in a 12-month period, the company may be deemed to have a permanent establishment in India.
A finding of permanent establishment can bring a corporate tax cost. Experts warned that attributable profits could face an Indian corporate tax rate of 35%, along with compliance costs, transfer pricing audits and withholding requirements.
For workers, time in India can also change their personal tax status. H-1B holders who remain in India for 182 days or more in a financial year qualify as “residents” for tax purposes, potentially exposing their global income to Indian taxation.
Tax professionals said that even when wages come from a U.S. employer, being physically present in India while performing work can pull income into India’s tax net, creating a dual compliance challenge across U.S. and Indian rules.
The immediate corporate response has varied, but specialists described employers reviewing remote work arrangements with international tax advisers before permitting extended India-based work, and coordinating across HR, legal and immigration teams to manage risk.
Some firms have filed short-term remote-work amendments with USCIS. Experts warned those filings do not mitigate Indian tax risk tied to the worker’s physical location and activities.
Other employers have explored routing renewals through near-shore centers in Canada or Mexico, where limited “drop-box” renewals are still possible, as companies seek a way to keep employees closer to the U.S. labor market while consular capacity remains constrained in India.
For workers, prolonged stays in India during stamping delays can create personal tax complexity. Specialists said that crossing India’s 182-day threshold can create tax residency, and wages earned while working remotely in India may draw Indian taxation even if the payor remains a U.S. company.
The situation has left many Indian professionals who traveled home for the 2025 holidays “locked out” of the U.S., with some facing job loss if employers cannot accept long-term remote work or the permanent establishment tax risk.
LinkedIn data from late 2025 showed a 40% increase in tech professionals relocating to India permanently due to U.S. visa uncertainty, reflecting what experts described as a reversal of part of the talent pipeline.
Employers weighing remote work from India have also had to consider the treaty dimension. Specialists said the U.S.–India Income Tax Treaty may mitigate some outcomes, but only if firms maintain documentation and comply with requirements to claim benefits.
The pressure on employers has risen as backlogs persist and policy changes reshape costs and eligibility. The combination of visa delays, enhanced screening and higher fees has made it harder for companies to rely on quick international travel for renewals, while remote work can introduce a separate, costly exposure through permanent establishment.
Workers and employers looking for official information have tracked updates from immigration and consular authorities, including USCIS newsroom announcements, U.S. Embassy & Consulates in India notices, and guidance published on travel.state.gov. USCIS also maintains program information at its H-1B specialty occupations page.
For employers, specialists said the central question remains how to keep roles staffed without creating a taxable presence abroad. For workers, the question is how to keep paychecks and status intact without triggering unexpected tax residency and filing obligations in India.
The policy push in Washington has framed those choices in sharper terms. Matthew Tragesser reiterated the administration’s stance.
“As part of the Trump Administration’s commitment to H-1B reform, we will continue to demand more from both employers and aliens so as not to undercut American workers and to put America first.”
Tragesser said the comment in context of broader H-1B policy changes.
U.S. Firms Face Tax Risk When H-1B Workers Work from India Creating Permanent Establishment
U.S. employers face unexpected corporate tax liabilities in India as H-1B visa delays force employees to work remotely abroad. While firms like Amazon permit this to maintain operations, experts warn that extended stays create ‘permanent establishment’ risks under Indian law. Meanwhile, new U.S. immigration rules, including massive filing fees and manual social media screening, have exacerbated backlogs, pushing visa interview availability into mid-2027.
