"The Department of State is in conversation with the Government of India on determining the way forward on the immediate case," a State Department official said.
"However, we recognize the need to address the larger issues. The employment of domestic workers will be on the agenda for bilateral discussion in the weeks and months ahead," the official added.
Officials from both the countries continued to hold talks to resolve the issue, which has strained bilateral ties.
The State Department official's remarks came a day after India, in a tough reciprocal action, downgraded the immunity of certain category of US diplomats and withdrew the immunity enjoyed by their family members.
US consular officials in four consulates in India are being issued new ID cards specifying the limited immunity which will not protect them from serious offences. This is in line with the restricted immunity given to India's Consular officials in US.
Indian diplomat Devyani Khobragade was arrested on December 12 on charges of making false declarations in a visa application for her maid Sangeeta Richard. She was released on a USD 250,000 bond.
Subsequent revelations that she was strip searched and lodged in prison with drug addicts and criminals triggered a row between the two sides. Her lawyer Daniel Arshack said Diplomatic Security Services agent Mark Smith who handled the investigation and arrest of Khobragade on visa fraud charges made a "serious" goof-up in the case as he erred in determining the salary of her domestic help from the paperwork submitted by the Indian diplomat to US authorities.
Arshack said Smith "erroneously and disastrously" concluded that the amount of USD 4,500 listed as monthly salary in the DS-160 visa application form submitted by Khobragade was the payment to be made to Richard.
Arshack stated that USD 4,500 was the monthly base salary of Khobragade and not that of Richard.
"It is clear that Mark Smith, the Diplomatic Security Services agent who handled the investigation and arrest of Khobragade and who drew up and swore to the accuracy of the formal complaint in this case, simply made an error in reading the DS-160 form which supported the visa application for the domestic worker.
"He erroneously and disastrously believed that the USD 4,500 per month salary entry on the form was Richard's expected salary when, in fact, it was clearly a reporting of the base salary to be earned by the employer, Khobragade, in the United States," Arshack said.
He said it is clear from the visa papers submitted by Khobragade that she would be earning enough money to afford to pay Richard the USD 1,560 per month salary agreed to according to a contract between Richard and Khobragade.
These details were also submitted to the US Embassy in conjunction with Richard's application for the A-3 visa, which is the visa required for personal employees and servants of diplomats coming to US.
A DS-160 form is the online non-immigrant visa application required to be submitted by those seeking visas. At USD 1,560 per month, Richard would have received USD 9.75 an hour for 40 hours a week, as mandated under US law.
"This is a serious error. This goes to the heart of the false allegations against Khobragade. One investigator made the mistake and nobody caught it," Arshack said, adding it is ‘incredible for me to believe that no one in the prosecutor's office was aware of this’.
The office of Manhattan federal prosecutor Preet Bharara, who brought the charges against Khobragade, said it did not have any comment on Arshack's claims. "What can they say," Arshack retorted, adding that the prosecutor's office should have got the facts about the salary correct in the first place before charging and arresting Khobragade.
"Somebody who messes up on the paperwork and causes a terrible thing to occur is very very serious," he said.
"We hope and expect that US government will see that it makes sense to resolve this case quickly and with the least amount of polarisation between US and India," he said.
“The case could have been handled and can still be handled diplomatically," he added.
Arshack also ruled out the possibility of any out of court settlement in the case.
The complaint against Khobragade said Richard worked far more than 40 hours per week and was paid less than USD 9.75 per hour by Khobragade.
Meanwhile, Indian-American lawyer Ravi Batra said the decision of US to "evacuate" the family members of Richard from India just before the arrest of Khobragade was an infringement upon the judicial sovereignty of India.
"The extra-judicial removal of foreign citizens of a foreign sovereign, with potential fraud being perpetrated in the exiting-paperwork at the Indian airport, leaves one breathless at the audacity and scope of the acts taken to vindicate the alleged violation of our wages and hours laws and related visa-fraud, consciously and purposefully aided and abetted by Sangeeta," he said.
US Attorney Bharara has defended the "evacuation" describing it as necessary. Two days before Khobragade was arrested on the streets of New York, US secretly flew in three family members of Richard - her husband Philips and two children - on a ticket purchased by US Embassy in Washington.
Indian government has expressed its outrage over such an extraordinary move by United States.