US Scraps H-1B Visa Lottery, Shifts to Favour Higher-Paid Talent; IT Stocks Slide

The US Department of Homeland Security on Tuesday announced changes to its long-standing H-1B work visa selection process, scrapping the random lottery system and replacing it with a new framework that gives preference to higher-paid and more highly skilled foreign workers.

The announcement came on the same day that a US judge upheld President Donald Trump’s executive order imposing a $100,000 entry fee for new H-1B applications.

Following the move, shares of Indian IT companies remained under pressure on expectations that the revised system would make it costlier for firms to send lower-wage workers from overseas to the US. At 12.00 pm, shares of IT firms such as Coforge, Mphasis, Persistent Systems and Wipro were down over 1%. Shares of IT services majors including Tech Mahindra (down 0.92%), Infosys (0.92%), HCLTech (0.31%) and TCS (0.1%) were also trading in the red on the NSE. The Nifty IT index was down 0.69%, while the BSE Information Technology index slipped 0.39%.

The changes will come into force on February 27, 2026, ahead of the opening of electronic registrations for the next H-1B cap cycle. Under the revised rules issued on Tuesday night, the selection system will be overhauled, moving away from a purely random lottery. Instead, registrations will be prioritised based on wage tiers defined by the US Department of Labour, giving applicants with higher salary offers a greater chance of securing an H-1B visa.

The programme will continue to carry an annual cap of 85,000 visas, including those reserved under the master’s quota. Online registrations typically open in March and, because applications far exceed the number of available visas, a lottery has traditionally been used to select candidates. Employers are then required to submit full H-1B petitions for beneficiaries selected through this process.

In a formal statement, US Citizenship and Immigration Services (USCIS) argued that the existing lottery system had been exploited by certain employers to hire lower-wage foreign workers, potentially undercutting domestic labour.

“The existing random selection process of H-1B registrations was exploited and abused by US employers who were primarily seeking to import foreign workers at lower wages than they would pay American workers,” said Matthew Tragesser, a USCIS spokesperson. He added that the weighted system would better reflect congressional intent behind the programme and strengthen US competitiveness by encouraging employers to seek higher-skilled and higher-paid talent.

The final rule closely mirrors draft regulations issued in September, with no major departures. Under the revised structure, candidates offered a Level IV wage, the highest category, will receive four entries in the selection pool. Level III applicants will be entered three times, Level II twice, and Level I just once. This so-called “weighted lottery” is designed to significantly boost the chances of selection for higher-paid roles.

At present, all applicants, regardless of wage level, face identical odds of selection, around 29.59%. The new framework would sharply alter this balance. According to analysis by the National Foundation for American Policy (NFAP), the likelihood of a Level IV applicant being selected would rise by 107%, while the probability for a Level I candidate would fall by 48%. In practice, this would skew opportunities towards mid-career and senior professionals, while making it considerably harder for entry-level workers, including many recent international graduates from US universities, to secure an H-1B visa.

The implications for the Indian workforce seeking employment in the US at lower wage tiers could be significant. In the financial year ending September 2024, USCIS approved 1.41 lakh H-1B petitions, of which 80,449, or 57%, were for Indian nationals. This figure exceeds the statutory annual cap of 85,000 visas, as the agency typically approves additional cases to account for subsequent withdrawals or rejections.

Impact of the $100,000 H-1B Fee

The new selection framework was announced just hours after a DC District Court judge, Beryl Howell, ruled that President Donald Trump’s decision to impose a $100,000 fee for H-1B visas was within the authority delegated to the executive branch by Congress under immigration law.

“The lawfulness of the Proclamation and its implementation rests on a straightforward reading of congressional statutes giving the President broad authority to regulate entry into the United States for immigrants and non-immigrants alike,” Howell wrote in her judgment, as reported by Politico.

The US Chamber of Commerce and the Association of American Universities, which represents major higher-education research institutions, had filed the lawsuit, arguing that the fee violated congressional intent behind the H-1B programme.

Historically, the H-1B visa programme has benefited companies such as Amazon, TCS, Microsoft, Apple and Google, which rank among the largest recipients, with California hosting the highest concentration of visa holders. Supporters argue that the programme is critical for filling specialised roles and driving innovation, while critics say it has often been used for lower-level positions, enabling wage suppression.

Brokerages believe the overall impact on Indian IT firms will be limited, as the changes apply only to new applications. CLSA estimates a worst-case earnings impact of up to 6% by FY27. Motilal Oswal expects the first effects to show up in FY27 filings and flags potential legal challenges, while Nomura pegs the margin impact at a modest 10–100 basis points.