Employer of Record (EOR) in India for US CompaniesHire your India team in days. No entity. No permanent establishment surprises. No 3 a.m. compliance calls.
You found the engineer, the analyst, the support lead. They're in Bengaluru, Pune, Hyderabad or Ahmedabad. They're ready to start Monday.
The problem isn't the hire. It's everything sitting behind it — a company registration you don't want yet, a payroll system in a currency you don't hold, provident fund and insurance registrations that must exist before the first salary run, and a tax question nobody warned you about: whether that one employee just made your US company taxable in India.
N D Savla & Associates solves this two ways. We can employ your India team on our books through an Employer of Record arrangement while you keep complete control of their work. Or, when the numbers justify it, we can incorporate and run your own Indian subsidiary end to end. Most of our US clients start with the first and graduate to the second.
Summary
The 60-second answer
Definition
What an Employer of Record actually is in India — and what it isn't
India has no statute called the "Employer of Record Act". EOR is a commercial arrangement built on ordinary Indian company and employment law. Understanding how it's constructed matters, because that's where the risk sits.
How it is built
Our Indian entity is registered under the Companies Act, 2013, holds an employer provident fund code, an employees' state insurance code, GST registration, a tax deduction account number and shop-and-establishment registration in the relevant state.
That entity signs an employment agreement with your chosen candidate under Indian law.
Your US company signs a services agreement with us covering scope, cost, indemnities, intellectual property assignment and termination.
You pay us a monthly invoice in US dollars. We convert, run payroll in rupees, deposit statutory dues, and file every return.
What it is not
Not a staffing agency placement
The candidate is yours. You select them, set their compensation, manage them, and they work only for you.
Not a contractor arrangement dressed up
The person is a genuine employee with genuine statutory entitlements. That is the entire point — misclassification is the single most expensive mistake US companies make in India, because Indian authorities can look back several years and demand provident fund, insurance, gratuity, interest and penalties on payments already made.
Not a permanent structure
Most clients run EOR for 12 to 30 months, then transfer the team into their own entity once headcount justifies it. We handle that transition too.
Comparison
The three legal ways a US company can engage talent in India
| Employer of Record | Own Indian subsidiary | Independent contractor | |
|---|---|---|---|
| Time to first hire | 3 working days | 8–12 weeks | Immediate |
| Travel to India required | No | Usually yes — banks expect a signatory in person | No |
| Setup cost | Nil | ₹1.2–2.5 lakh (approx. US$1,400–2,900) plus advisory | Nil |
| Ongoing admin cost | Per-employee monthly fee | Audit, filings, ROC, TP study, secretarial — recurring regardless of size | Minimal |
| Who is the legal employer | The EOR entity | Your Indian company | Nobody — they're a vendor |
| Statutory benefits (PF, ESI, gratuity) | Handled | Your obligation | Not applicable if genuinely a contractor |
| Permanent establishment risk to US parent | Low, if structured and operated correctly | Low — the subsidiary is separately taxable | High if you direct them like an employee |
| Transfer pricing exposure | None for you | Yes — mandatory arm's-length markup and Form 3CEB | Limited, but the payment can be challenged |
| Can invoice Indian customers in rupees | No | Yes | No |
| IP assignment | Via employment contract + services agreement | Via employment contract | Via contractor agreement — weaker in practice |
| Best for | 1–20 people, testing India, speed | 15+ people, long horizon, Indian revenue | Genuine short project work, defined deliverables |
Cross-Border Tax
The permanent establishment question — what the rules actually say
This is where most online advice goes wrong, so here are the real thresholds under the India–United States Double Taxation Avoidance Agreement (DTAA) and Indian domestic law.
A permanent establishment (PE) means India can tax the profits attributable to your activity in India. For a US company, that means filing an Indian corporate return, paying Indian tax at the foreign-company rate plus surcharge and cess, and then fighting to claim a credit back home. The credit rarely covers the whole bill. That gap is the real cost of a PE.
The tests that matter
1. Fixed place PE (Article 5(1))
a fixed place of business in India through which your business is wholly or partly carried on. An office you lease, a desk you control, premises in your name. There is no day-count threshold here — this is the point most commonly misunderstood. It turns on control and permanence of the place, not on 182 days.
2. Service PE (Article 5(2)(l))
furnishing services in India through employees or other personnel. Under the India–US treaty this bites where activities of that nature continue in India for periods aggregating more than 90 days in any twelve-month period — or, where services are performed for a related enterprise, without that 90-day cushion. Ninety days. Not 182.
3. Construction / installation PE (Article 5(2)(k))
a building site, construction, installation or assembly project, or supervisory activity connected with one, continuing more than 120 days in any twelve-month period.
4. Dependent agent PE (Article 5(4))
someone in India who habitually exercises authority to conclude contracts on your behalf, or habitually secures orders for you. This is the biggest live risk for US companies, and it's the one an EOR does not fix by itself. If your India-based salesperson negotiates and closes deals in your name, you have an agency PE exposure whether that person is employed by an EOR, by a subsidiary, or by nobody at all.
5. The 182-day rules — where they actually apply
Two places, and neither is the fixed-place PE test: individual tax residency, where a person present in India for 182 days or more in a tax year is generally an Indian tax resident, bringing their global income into the Indian net; and the resident director requirement under Section 149(3) of the Companies Act, 2013, which requires every Indian company to have at least one director who has stayed in India for at least 182 days during the financial year. If you incorporate, you need a resident director — one of the first things we solve for.
How we structure around it. Contract-signing authority stays with your US entity. India roles are documented as engineering, support, research or back-office — not revenue-concluding. No lease, no signage and no bank account in your US company's name in India. Expatriate travel days are tracked against the 90-day service threshold. Where the facts are close to the line, we say so in writing and price the alternative rather than reassure you into a position we'd have to defend later.
The Hidden Cost
The transfer pricing cost of owning your own Indian subsidiary
This deserves its own section because it is the single most under-budgeted item in India entry planning.
The mechanics. Suppose you incorporate an Indian subsidiary that does engineering work exclusively for your US parent. There are no third-party customers. Economically, the subsidiary is a cost centre — you would happily fund it at cost.
Indian law does not allow that. Your US parent and your Indian subsidiary are associated enterprises, and every transaction between them is an international transaction subject to transfer pricing rules. The subsidiary must charge the parent an arm's length price — what an independent Indian service provider would have charged. For a captive service centre, that is conventionally computed as total operating cost plus a markup.
Worked example. Say the Indian subsidiary's annual operating cost is US$1,000,000 (salaries, rent, software, depreciation, everything).
| Line | Amount |
|---|---|
| Operating cost | US$1,000,000 |
| Arm's-length markup at 15.5% | US$155,000 |
| Amount the subsidiary must invoice the US parent | US$1,155,000 |
| Indian taxable profit | US$155,000 |
| Indian corporate tax at approx. 25.17% (concessional regime, incl. surcharge and cess) | ≈ US$39,000 per year |
That US$39,000 is Indian tax on profit that exists only because the law says it must. Your US parent gets a deduction for the higher intercompany charge, so it is not a pure loss — but it is real cash out in India, every year, and it grows with your headcount. An EOR arrangement has no equivalent charge, because there is no associated enterprise and no intercompany transaction. That is a genuine and often decisive economic difference at small scale.
Where the 15.5% figure comes from. India's transfer pricing safe harbour regime was substantially reset in Budget 2026. From Tax Year 2026-27, software development, IT-enabled services, knowledge process outsourcing and contract R&D for software have been consolidated into a single "Information Technology Services" category carrying a uniform safe harbour margin of 15.5% on operating expenses, with the eligibility threshold raised from ₹300 crore to ₹2,000 crore, automated rule-based approval, and validity locked in for five consecutive years. That replaced the older tiered margins of 17% to 24%, which most companies refused to elect because they sat well above commercial reality. A separate 15% safe harbour was introduced for qualifying data centre services.
If you don't elect safe harbour, you must benchmark independently: a transfer pricing study using comparable Indian companies, typically landing somewhere in the 12–20% band depending on function, risk and the comparable set. That study must be refreshed annually and defended if challenged.
Compliance that comes with it, regardless of size
Form 3CEB
an accountant's report certifying the international transactions. Mandatory the moment there is any transaction with an associated enterprise. No de-minimis exemption. Due 31 October.
Transfer pricing documentation
required where aggregate international transactions exceed ₹1 crore.
Master File and Country-by-Country reporting
for larger groups only, but worth checking early.
Extended return deadline
companies with international transactions file by 30 November rather than 31 October.
Budgeting
What an Indian employee actually costs you
US companies routinely underestimate this by 20–25% because they benchmark against a gross salary and forget that Indian compensation is structured as cost to company (CTC) — everything the employer spends, including statutory contributions.
Illustrative build-up for a mid-level engineer (figures indicative; converted at approximately ₹88 = US$1, and rates fluctuate):
| Component | Notes | Approx. annual |
|---|---|---|
| Basic salary | Must now be at least 50% of total remuneration under the Labour Codes | ₹9,00,000 |
| House rent allowance & other allowances | — | ₹7,00,000 |
| Gross fixed pay | — | ₹16,00,000 |
| Employer provident fund | 12% of basic wages; employers may cap at the ₹15,000 statutory wage ceiling | ₹21,600 – ₹1,08,000 |
| Employees' state insurance | 3.25% employer share; applies only where monthly gross is up to ₹21,000 | Usually nil at this level |
| Gratuity provision | Roughly 4.81% of basic, payable on exit after qualifying service | ₹43,300 |
| Statutory bonus | Where applicable — wage ceiling ₹21,000/month | Usually nil at this level |
| Professional tax | State levy; e.g. up to ₹2,500/year in Maharashtra, ₹2,400 in Karnataka; not levied in Delhi, Haryana or UP | ₹2,400 |
| Insurance, equipment, tools | Employer-provided | Variable |
| Approximate employer cost | — | ₹16,50,000 – ₹17,60,000 (≈ US$18,700 – US$20,000) |
Statutory items you cannot contract out of
Employees' Provident Fund
12% employee + 12% employer on basic wages. Mandatory for establishments with 20 or more employees; voluntary coverage available below that. The employer's share splits between the provident fund and the pension scheme.
Employees' State Insurance
0.75% employee + 3.25% employer, for employees earning up to ₹21,000 gross per month.
Gratuity
a lump sum on exit after qualifying continuous service, computed on last drawn basic salary. Must be provisioned monthly, not discovered at resignation.
Statutory bonus
for employees within the wage ceiling, between 8.33% and 20% of eligible wages.
Maternity benefit
26 weeks of fully paid leave for the first two children.
Paid leave
earned leave, casual leave and sick leave, with entitlements varying by state.
Tax withholding
monthly deduction at source on salary, quarterly returns, annual salary certificate to the employee.
The Labour Codes change that raised everyone's costs. India's four Labour Codes — Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions — came into force on 21 November 2025, consolidating 29 legacy statutes. The Central Rules were notified on 8 May 2026, and state rules are being notified progressively; labour is a concurrent subject, so obligations still vary state by state.
The commercially significant change is the new definition of wages: allowances excluded from wages are capped at 50% of total remuneration, and any excess is added back. For years, Indian employers structured salaries with a small basic and large allowances precisely to minimise provident fund and gratuity liability. That structure no longer works. If you inherited a compensation model built before November 2025, it needs re-cutting — and the recalculation increases employer cost. Under an EOR arrangement, that recalculation is our problem. In your own entity, it is yours.
Legal
Intellectual property, data and the things US counsel asks about
IP assignment
Indian law does not automatically vest all employee-created IP in the employer in the way US work-for-hire doctrine does, and the position on inventions is narrower still. Every employment agreement we issue contains express present assignment language covering source code, designs, documentation, inventions and improvements created in the course of employment, with the assignment flowing through the services agreement to your US entity. Get this drafted properly at the start — retrospective assignment from a departed employee is a bad conversation.
Data protection
The Digital Personal Data Protection Act, 2023 governs how employee and customer personal data is handled in India. Where your India team touches US customer data, you also have your own domestic obligations to satisfy. We map the flows and paper them.
Restrictive covenants
Post-employment non-compete clauses are largely unenforceable in India under Section 27 of the Indian Contract Act, 1872. Confidentiality obligations, non-solicitation of clients and employees, and garden leave during notice are enforceable and are what we build in instead. If your US template relies on a two-year non-compete, it will not survive an Indian court.
Termination
India is not at-will. Notice periods are contractual, commonly 30 to 90 days. Where an employee qualifies as a "workman", additional statutory protections apply to termination and retrenchment. Exit requires full and final settlement, gratuity where due, provident fund transfer or withdrawal support, a relieving letter and the annual tax certificate. We manage the whole exit so it doesn't become a labour dispute eighteen months later.
Next Stage
When it's time to stop using an EOR and incorporate
There is no universal number, but these are the honest trigger points:
Headcount above roughly 15–20
Per-employee EOR fees scale linearly. Entity overheads don't.
You want to bill Indian customers in rupees
An EOR cannot do this. You need an Indian entity with GST registration.
You're raising, being acquired, or running due diligence
Buyers and investors prefer a clean owned subsidiary with audited accounts to a contractual arrangement they must diligence.
You need physical premises in India
Premises, inventory, or a registered India brand presence all require your own entity.
Equity for the India team
Granting stock into an EOR-employed population is workable but clumsier; a subsidiary makes it cleaner.
What incorporation involves
For a US parent, the standard vehicle is a private limited company, wholly owned or nearly so:
Structure:
minimum two shareholders and two directors, at least one director resident in India (the 182-day test above). Your US parent can hold up to 100% of the shares, with a nominee holding a single share where needed.
Registration:
digital signature certificates, director identification numbers, name reservation, then the integrated SPICe+ incorporation filing which bundles the company registration, permanent account number, tax deduction account number, provident fund and insurance registrations, professional tax and bank account opening.
The bank account — plan for a trip, or plan around one
This is the step that quietly derails timelines, and almost nobody mentions it before you've paid for incorporation. Under Indian know-your-customer rules, the bank must verify every director, authorised signatory and beneficial owner. For US-resident directors that means passport and address proof notarised and apostilled in the United States — and in most cases an authorised signatory attending an Indian branch physically to sign the account opening forms and record specimen signatures. Video verification is generally available to resident individuals, not to foreign nationals, and most banks will not accept a power of attorney for account opening. The workaround: appoint your India-resident director as the sole banking signatory, with board-approved transaction limits and dual-approval controls so you keep financial control from the US. We set this up as standard — but it has to be decided at incorporation, not after the account application has been returned.
Foreign investment:
most services sectors permit 100% foreign direct investment under the automatic route without prior government approval. Share allotment must be completed within 60 days of receiving funds, a valuation report is required, and Form FC-GPR must be filed with the Reserve Bank of India within 30 days of allotment. An annual Foreign Liabilities and Assets return follows each 15 July.
Timeline:
typically 8 to 12 weeks from documents in hand to first compliant payroll, with apostilled and notarised US corporate documents usually the critical path.
Ongoing:
statutory audit (mandatory at any size), annual financial statement and annual return filings with the Registrar of Companies, board meetings and minutes, director KYC, quarterly withholding returns, monthly GST returns, transfer pricing certification, and the corporate income tax return.
We do all of the above, and we migrate your EOR-employed team into the new Indian subsidiary without breaking their service continuity, gratuity accrual or provident fund accounts.
Our Services
What N D Savla & Associates does for you
Employer of Record
India entity setup
Ongoing finance and compliance
Cross-border tax advisory
Why Us
Why US companies choose us over a global EOR platform
You get a chartered accountancy firm, not a payroll portal
When the tax officer sends a notice, a platform routes you to a support queue. We respond, because responding to Indian tax authorities is our profession.
One firm from first hire to owned subsidiary
No handover, no second onboarding, no consultant explaining your business to another consultant. The people who ran your EOR payroll incorporate your entity and audit its first accounts.
We tell you what will go wrong
Including when an EOR is the wrong answer for you, when your India role genuinely does create agency PE exposure, and when the honest recommendation is that you're not ready to hire in India yet.
US-hours availability and plain-English reporting
Monthly reporting your controller can drop into a US chart of accounts without translation.
Process
How to get started
Discovery call (30 minutes)
Written proposal (2 business days)
Agreement and onboarding
Live in 3 working days
Ongoing
Frequently Asked Questions
Common questions from US founders, CFOs and controllers
Can a US company hire an employee in India without setting up an Indian company?
Yes. You cannot employ someone directly from a US entity with no Indian presence, but you can engage an Employer of Record — a registered Indian company that becomes the legal employer while you direct the work day to day. This is a well-established and fully compliant route.
How long does it take to hire someone in India through an EOR?
An EOR hire can be live in as little as 3 working days from signing the services agreement. The usual constraint is not our setup — it is the candidate's notice period with their current employer, which in India is commonly 30 to 90 days.
Does using an Employer of Record create a permanent establishment for my US company in India?
Not by itself. An EOR removes the fixed-place and employment-relationship exposure by placing the employment with an Indian entity. But permanent establishment risk turns on conduct, not labels — if your India-based person habitually negotiates or concludes contracts in your name, you may have a dependent-agent PE regardless of who signs their payslip. We assess this on your actual facts before you hire.
What is the 182-day rule everyone mentions?
It is widely misapplied. There is no 182-day test for a fixed-place permanent establishment. The 182-day threshold appears in two other places: individual tax residency, where a person present in India for 182 days or more in a tax year becomes an Indian tax resident, and the Companies Act requirement that every Indian company have at least one director who stayed in India for 182 days during the financial year. The service PE threshold under the India–US treaty is 90 days in any twelve-month period, and the construction PE threshold is 120 days.
What happens if I just pay someone in India as a contractor?
It is the highest-risk option. If the person works exclusively for you, follows your schedule and reports to your managers, Indian authorities will treat them as an employee. Reclassification brings back-dated provident fund, insurance and gratuity liabilities plus interest and penalties, and simultaneously strengthens the argument that your US company was operating directly in India. Genuine project work with defined deliverables and multiple clients is a different case.
Do I really have to pay Indian tax on a subsidiary that only serves my own parent company?
Yes. Under Indian transfer pricing rules, your parent and subsidiary are associated enterprises, and the subsidiary must charge an arm's-length price — conventionally its operating cost plus a markup. That creates taxable Indian profit even though economically you are only funding costs. From Tax Year 2026-27 the safe harbour margin for consolidated IT services is 15.5% of operating expenses; outside safe harbour, benchmarked markups commonly fall in the 12–20% range.
What is Form 3CEB and do I need it?
It is an accountant's report certifying international transactions with associated enterprises. If your Indian entity has any transaction with your US parent — even one — it is mandatory. There is no minimum threshold. It is due by 31 October, and companies with international transactions get an extended income tax return deadline of 30 November.
Is an EOR cheaper than setting up my own Indian entity?
Below roughly 15 employees, almost always. Entity overheads — statutory audit, annual filings, secretarial compliance, transfer pricing documentation, and the tax on the mandatory markup — are largely fixed and don't shrink with headcount. Above 15 to 20 people, the subsidiary usually wins. We'll model both on your real numbers.
How much does an Indian employee cost in total?
Budget roughly 3% to 12% above gross salary for employer statutory contributions, depending on salary level and state. Lower-paid employees carry proportionally more because provident fund and state insurance thresholds bite. A ₹16,00,000 gross engineer typically costs around ₹16,50,000 to ₹17,60,000 all-in.
What are the mandatory employer contributions in India?
Provident fund at 12% of basic wages for establishments with 20 or more employees; employees' state insurance at 3.25% employer share for employees earning up to ₹21,000 gross monthly; gratuity provisioning; statutory bonus where the wage ceiling applies; and professional tax in states that levy it.
How have the new Labour Codes changed employer costs?
The four Labour Codes took effect on 21 November 2025, with Central Rules notified on 8 May 2026. The most expensive change is the new wage definition: excluded allowances are capped at 50% of total remuneration and any excess is added back to wages. Since provident fund, gratuity and bonus are computed on wages, salary structures built around a small basic and large allowances no longer reduce cost. Existing structures need recutting.
Can my India team hold equity in my US company?
Yes, subject to Indian foreign exchange rules on overseas investment by residents, and to Indian tax on the perquisite value at exercise and capital gains on sale. Reporting obligations attach to both the employee and, in some structures, the Indian entity. It is workable — it just needs planning, not improvisation.
Who owns the code and IP my India team creates?
Whoever the contracts say. Indian law does not automatically assign employee inventions to the employer the way US work-for-hire doctrine does. We include express present-assignment language in every employment agreement, flowing through the services agreement to your US entity, covering code, designs, documentation and inventions.
Are non-compete agreements enforceable in India?
Post-employment non-competes are generally unenforceable under Section 27 of the Indian Contract Act, 1872. Confidentiality, non-solicitation of clients and employees, and garden leave during the notice period are enforceable and are what we use instead.
Can I terminate an Indian employee the way I would in the US?
No. India is not an at-will jurisdiction. Termination requires contractual notice or pay in lieu, commonly 30 to 90 days, and employees who qualify as "workmen" have additional statutory protections. Exit also requires full and final settlement, gratuity where due, and issuance of a relieving letter and tax certificate.
What is the minimum number of people I need to justify an EOR?
One. There is no minimum. Many of our US clients start with a single senior hire to test whether an India team works for them before committing further.
Can an EOR hire in any Indian city?
Yes. We support hiring across states. Bear in mind that leave entitlements, professional tax and shop-and-establishment obligations vary by state, so hiring in Karnataka and Maharashtra means two compliance calendars. Under an EOR arrangement we absorb that complexity.
How do I pay the EOR — and in what currency?
A single monthly invoice in US dollars, paid by wire from your US account. We handle the currency conversion, the rupee payroll run and every statutory deposit.
Do I need an Indian bank account?
Not for an EOR arrangement. If you incorporate your own subsidiary, yes — and note that a US signatory on an Indian account may trigger US foreign account reporting obligations. Your US CPA should be told early.
What is the difference between a subsidiary, a branch office and a liaison office?
A private limited subsidiary is a separate Indian company, taxed at domestic company rates, and is the usual choice. A branch office is an extension of the foreign company, taxed at the higher foreign company rate, and needs Reserve Bank of India route approval. A liaison office cannot earn income at all — it exists only for representation and market research. For hiring and operations, the subsidiary is almost always the right vehicle.
How long does company incorporation in India take for a US parent?
Roughly 8 to 12 weeks from complete documents to first compliant payroll. The critical path is usually apostilled and notarised US corporate documents and the digital signature certificates for the proposed directors, not the government filings themselves.
Do I have to travel to India to incorporate the company or open its bank account?
Not for the incorporation itself — that runs on documents you sign, notarise and apostille in the United States. The bank account is where physical presence usually becomes an issue. Indian banks must verify directors, authorised signatories and beneficial owners, and most will expect an authorised signatory to attend a branch in person to sign the account opening forms and record specimen signatures. Video verification is generally offered to resident individuals rather than foreign nationals, and most banks decline a power of attorney for account opening.
The standard solution is to appoint your India-resident director as the sole banking signatory, with board-approved transaction limits and dual-approval controls, so no one from your US team has to fly. It has to be structured at incorporation. An Employer of Record arrangement avoids the question entirely, because there is no Indian bank account of yours to open.
Do I need an Indian resident to be a director?
Yes. Every Indian company must have at least one director who stayed in India for at least 182 days during the financial year. We provide resident director solutions for US-owned companies, with the scope and liability position documented clearly.
How do I get money back out of India once the subsidiary is profitable?
Through dividends, intercompany service fees or royalties, each with its own withholding treatment and foreign exchange documentation. Under the India–US treaty, dividends to a US company holding at least 10% of the voting stock attract a reduced rate. Claiming treaty rates requires a tax residency certificate, Form 10F and a no-permanent-establishment declaration. Plan the repatriation route before you incorporate, not after profits accumulate.
Can I transfer my EOR employees into my own entity later?
Yes, and it's one of the reasons clients start with us rather than a platform. We manage the transfer so service continuity, gratuity accrual and provident fund accounts carry across without resetting the employee's entitlements or triggering a deemed termination.
Is my India advice from before April 2026 still valid?
The substance largely is; the citations mostly aren't. The Income-tax Act, 2025 replaced the 1961 Act on 1 April 2026 and renumbered virtually every section, and the Income-tax Rules, 2026 superseded the 1962 Rules. Tax rates and slabs were not changed. If you're working from an older memo, the conclusions may hold but the references need remapping.
Ready to hire in India?
Tell us the roles, the cities and the timeline. We'll come back with a costed comparison of Employer of Record against your own subsidiary, an honest read on your permanent establishment exposure, and a plan you can put in front of your board.
Book a free 30-minute India entry callThis page is general information, not advice on your specific facts. Thresholds, rates and statutory positions stated here reflect the law as at August 2026 and are subject to change. Please take formal advice before acting.