H-1B Workers Stranded in India Create Tax Dilemma for Employers

"US businesses risk hefty tax bills as thousands of their H-1B workers remain stranded in India because of months-long visa interview delays, complicating remote work options. The State Department rescheduled the workers' visa interview appointments after abruptly imposing extensive new social media screening policies, delaying the US return of people who traveled to India to visit relatives. Companies will have to mull big tax implications when deciding on options like long-term remote work accommodations for affected workers."

"Allowing them to work remotely for an extended period could result in a so-called "permanent taxable entity," said Parizad Sirwalla, partner and national head of tax at Global Mobility Services at KPMG India. If stranded workers trigger the creation of a permanent establishment in India, that new entity would have to pay taxes in India and comply with a myriad of reporting requirements. The tax and reporting obligations that would entail mean employers need to carefully analyze activities that workers can perform while present in the country."

"Consular offices adopted the screening policies suddenly in mid-December, pushing back pending interview appointments for months-in some cases, as late as 2027. The timing of the policy change was disruptive because it came during the holiday travel season that many H-1B workers use to renew visas. But it's been especially messy for employees from India, the biggest source of H-1B workers."

Thousands of H-1B workers are stranded in India due to months-long visa interview delays after new social media screening policies required rescheduling. U.S. employers face potential significant tax exposure if prolonged remote work by those employees causes a permanent taxable entity or permanent establishment to arise in India. Creation of such an entity would trigger Indian tax payments and extensive reporting obligations. Employers must analyze which activities stranded workers can perform while in India and weigh payroll decisions and compliance costs. The delays have disrupted family reunions and schooling for affected employees.

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