How to Legally Hire and Pay Someone in India From the US

Yes, you can legally hire someone in India from the US, and you do not need an Indian entity to do it. What you cannot do is run that person on a US W-2. Your US company holds no Indian provident fund, ESI, professional tax or TDS registrations, so it has no lawful way to operate an Indian payroll, and a W-2 is not an Indian employment instrument. That one fact pushes every US employer into one of three routes. This is a practical guide to how to legally hire someone in India from the US: the three routes, what each costs per month, what gets deducted from an India salary, the tax and IP exposure that follows the hire, and the order in which we get a first hire onboarded and paid.

Can a US company legally hire employees in India?

Yes. A US company can legally employ someone in India through an Employer of Record, through its own Indian subsidiary, or engage them as a genuine independent contractor. It cannot put them on a US W-2. We run the first of those three as Wisemonk EOR, and it is the fastest route to a compliant hire.

The reason the W-2 route is closed is administrative, not philosophical. The work is performed in India, so Indian employment law governs it, and Indian payroll runs on registrations your US entity does not hold and cannot obtain without incorporating locally. There is no US-side form that substitutes for an Indian provident fund establishment code.

What US employers get wrong most often is the fourth option they invent for themselves: paying a full-time person by monthly wire and describing the arrangement as contracting. Indian authorities test the substance of the relationship rather than the label on the agreement, which is the whole of the contractor versus employee question in India. If the person works your hours, on your equipment, under your direction, exclusively, it is employment, and the liabilities that follow are back-dated.

What are the three legal routes for a US company to hire in India?

For a US company hiring employees in India, there are three routes, and the choice is really about who carries the Indian employer obligations. An Employer of Record carries them for you. Your own Indian entity means you carry them. A contractor engagement means nobody carries them, which is fine for genuine project work and expensive when the role is really a job.

Employ through an Employer of Record

Your obligation here is small and mostly commercial: agree the salary, sign the service agreement, fund payroll each month. The EOR holds the Indian employment, provident fund, ESI and tax registrations already, employs the person on an Indian contract, and files everything under its own establishment codes. You keep every people decision, which is the part US buyers assume they lose. We publish the full mechanics of hiring in India without an entity, and the speed comes entirely from registrations that already exist rather than from anything clever. See our India Employer of Record service for scope.

Set up your own Indian entity

Your obligation is all of it. You incorporate, appoint a resident director, hold a registered office, obtain PAN, TAN, GST, provident fund and ESI registrations, open a local bank account, then run payroll and the annual audit and ROC filings forever. In our experience it runs to several months from incorporation to a first compliant pay run, and the cost starts at about $15,000 one time plus a permanent compliance overhead. The route is right when India is structural to the business, not when you are testing it. Details on the process sit on our India company registration page.

Engage an independent contractor

Your obligation is to make the engagement genuinely a contract: defined deliverables, a finite scope, the contractor's own tools, other clients, an invoice. You also owe Indian withholding on the payment and an express IP assignment, because neither is automatic. Where the relationship is genuine, a Contractor of Record puts a compliant Indian agreement, the classification review and the payout in one place. Where it is not, run the misclassification check before the second invoice, not after the audit.

How does a US company decide between an EOR, entity, and contractors?

Three cues settle it in most cases. If you have no Indian entity and a start date this quarter, it is an EOR. If India is becoming a permanent site with growing headcount and local revenue, it is your own entity. If the work is a defined project with an end date and the person serves other clients, it is a contractor.

The cost crossover is the question everyone asks next, and it is not a fixed headcount. The point where your own entity costs less than an EOR moves with the per-employee rate you actually pay, so it is worth modeling rather than memorizing. We keep that model on the EOR versus entity comparison for India, with the arithmetic in the EOR vs entity calculator.

This page covers what a US employer has to do and what it costs. If you want the model-choice depth instead, read the best way to hire employees in India.

What will your India candidate ask about being employed by an EOR?

This is the objection you will have to handle yourself, usually in the last conversation before the offer is accepted, and almost no vendor page prepares you for it. Four questions come up, and answering them badly costs you the candidate.

• Who signs my employment contract: the EOR's Indian entity does, on an India-compliant agreement. You are named as the client whose work they perform, and you direct it. Say this plainly rather than letting them discover it at signature.
• Whose name is on my payslip and my provident fund account: the EOR's. Contributions are filed under the EOR's establishment registration, which is normal and is also the thing candidates most often want confirmed in writing.
• What happens to my gratuity clock: gratuity accrues against continuous service with the legal employer, so a change of legal employer is a fair question and deserves a straight answer rather than a reassurance. The rest of the statutory benefits an India employee receives are unchanged.
• Can I still have equity in your company: a grant from your US company to someone the EOR employs is not the same instrument as a grant to your own employee. Confirm the structure with counsel and with the provider before you put a number in the offer.

How do US companies pay employees in India compliantly?

You pay in Indian rupees, into an Indian bank account, after Indian statutory deductions, through an entity that holds Indian payroll registrations. The money leaves your US account as a documented remittance to that entity, which converts it, runs the deductions and pays net salary. Salary is quoted as annual cost to company, not as an hourly US-style rate.

That last point catches people. Indian compensation is discussed as a total annual package, and the payslip splits it into basic pay, allowances and employer contributions. If you quote a US-shaped number you will negotiate against a figure the candidate is not comparing you on. Our guide to paying employees in India and the India payroll pillar cover the structure in full.

What gets deducted from an India salary?

Two layers: what the employer contributes on top of salary, and what the employer withholds out of it. Figures below are converted at about ₹96 to the dollar as of September 2026.

Provident fund contributions now run under the EPF Scheme, 2026, made under the Code on Social Security, 2020. Sources: EPFO, ESIC contribution rates and ESIC coverage. Professional tax is a state levy, so it changes at the state border and has to be registered for in each state where you employ someone.

Which forms and deadlines does a US-owned India payroll hit?

India's four labour codes took effect on November 21, 2025, consolidating 29 central labour laws. The Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code and the Code on Wages are in force in full. The Code on Social Security commenced in part, and provident fund now runs under it through the Employees' Provident Funds Scheme, 2026, which replaced the 1952 Scheme on June 29, 2026. As of September 2026, central and state rules under the codes are still being finalized. Our labour code explainer tracks the rollout.

From April 1, 2026, salary TDS is governed by section 392 of the Income-tax Act, 2025, which replaced section 192 of the Income-tax Act, 1961. Tax is deducted at the average rate of income tax for the tax year on the employee's estimated salary income. Salary paid on or before March 31, 2026 remains under the 1961 Act.

Employers file a quarterly salary TDS statement in Form 138, which replaced Form 24Q, under rule 219 of the Income-tax Rules, 2026. Quarters one to three are due on July 31, October 31 and January 31; the fourth quarter is due on May 31 of the following financial year. Each employee then receives Form 130, the annual salary TDS certificate that replaced Form 16, by June 15, downloaded from TRACES.

On monthly cadence: salary TDS is deposited within seven days of the end of the month, with tax deducted in March due by April 30, and ESI within 15 days of the end of the month. Miss one and the penalty is interest plus a late-filing fee rather than a warning, which is the main argument for not learning India payroll compliance on live payroll.

How does the money get from a US bank account to an Indian employee?

The remittance leaves your US account, reaches an authorized dealer bank in India against documentation of what the payment is for, converts to rupees, and lands in the employing entity's payroll account. Net salary reaches the employee after the deductions above. Nothing in that chain permits paying an Indian employee's salary directly into their personal account from US payroll.

Two things to settle in the contract before you sign. First, the foreign exchange rate you will actually receive, and whether a markup sits on top of the interbank rate. Get that markup in writing before the first payroll. Second, the payment rail: we hold a US bank account so American clients can fund payroll by ACH rather than by international wire, which removes a fee and a day. We wrote up how US startups run India payroll without an entity if you want the operating detail.

What does a US company actually pay for an India hire each month?

For a US company hiring employees in India, the monthly bill has three components and no fourth: the gross salary you agreed, the employer side of the statutory contributions in the table above, and the per-employee service fee. Wisemonk EOR starts at $99 per employee per month. There is no incorporation cost, no resident director, and no annual audit, because none of those attach to you.

The employer statutory load is smaller than US employers expect, because the main contributions are capped rather than proportional. Provident fund is calculated on a wage base capped at about $260 (₹25,000) a month, and ESI stops applying above about $220 (₹21,000) a month, so on a senior engineer the statutory add-on is a bounded rupee amount rather than a percentage of a large salary. Gratuity is the accrual that keeps growing, at 15 days' wages per completed year.

Run your own role through the employee cost calculator rather than working from an average, and check the band with the India salary calculator before you set the offer. Full commercial terms are on our pricing page.

One reframe for anyone who finds a per-head fee expensive. Compare it against what the hire costs to find, not against the salary. Our recruitment fee is 10% of annual salary, paid once. A monthly EOR fee sits against that, against an incorporation you do not do, and against a compliance function you do not staff. Before you sign, ask whether the provider holds an up-front deposit against liabilities that accrue in the employee's name, how much it is, and when it is refunded, and get the answer in writing.

What tax and legal exposure comes with hiring in India from the US?

Four exposures matter to a US company hiring employees in India: permanent establishment for the US parent, the India-US tax treaty position, the foreign exchange rules that govern money you send into India, and IP assignment on everything the hire produces. US state payroll rules are the one that usually turns out not to apply.

Does hiring in India create a permanent establishment for your US company?

Permanent establishment is the exposure that actually costs money, because it makes a share of the US parent's income taxable in India. It is triggered by what the person does and how you pay them, not by the fact that they live in India. The two patterns that raise it are a worker who negotiates or concludes contracts on the parent's behalf, and a worker directed exactly like an employee while being paid as a contractor from US payroll.

Employing through an EOR is the structural answer, because the person is employed by an Indian entity that is not yours and performs services for you under a service agreement. Any specific treaty threshold, including the service-PE day count and the dependent-agent test, needs your tax advisor rather than a blog. Start with our permanent establishment risk guide for India and the PE risk quiz, which scores the pattern you are actually running.

How does the India-US tax treaty affect what you withhold?

The India-US double taxation avoidance agreement exists to stop the same income being taxed in both countries, and it is not self-executing. Relief depends on documentation held on both sides before the payment, not claimed afterwards. Every specific in this area, including which article applies to your payment type, the withholding rate it sets, and the certificates and forms each side has to hold, has to be confirmed with your CPA and Indian counsel for your facts. Where the person is employed in India by an Indian employer, the treaty question narrows considerably, because Indian salary tax is withheld at source in India and there is no US payment to characterize.

What does FEMA require when you send salary money into India?

Money moving into India is governed by the Foreign Exchange Management Act and the rules the Reserve Bank of India makes under it, which is why remittances go through an authorized dealer bank against documentation rather than as an unexplained transfer. In practice your obligation is to fund an entity that can evidence what the money was for. The regulation numbers, the purpose code that applies to a payroll funding remittance, and any reporting threshold are all specifics we will not print without a current primary source, because RBI circulars in this area get withdrawn and superseded.

Do US state payroll rules follow a worker based in India?

Generally no, and this is the exposure that dissolves once you look at it. A worker employed in India by an Indian entity is not on your US payroll, so no US state payroll registration, unemployment insurance account or state withholding obligation follows from the hire itself. Confirm it with your CPA against your own facts, particularly if the person spends time physically in a US state.

Who owns the code your India engineer writes?

Assume nothing transfers automatically. Work created by an employee in the course of employment generally vests with the employer under Indian copyright law, under section 17 of the Copyright Act, 1957, while a contractor's output does not transfer without an express written assignment, and the Patents Act, 1970 carries no employer-ownership equivalent at all. That difference is one of the two risks experienced buyers name first, and it is a drafting problem rather than a legal mystery.

What we do about it in practice: every India employment agreement and every contractor agreement carries an express assignment of intellectual property with a confidentiality clause, executed with e-stamp and e-sign so it is enforceable in India. Where a contractor relationship is drifting toward employment, the IP position weakens at the same time as the classification position does, which is why they are worth fixing together. Our guide to IP protection when hiring India developers has the clause-level detail.

Does a US company need to sponsor a visa to hire someone in India?

No. The person lives in India, works in India, and is employed under Indian law, so no US work authorization is involved and there is nothing for you to sponsor. A US visa becomes relevant only if you later want to bring them to the US for travel or relocation, which is a separate process with its own timeline.

The inverse question does have an answer. If you send a US employee to work in India, that person needs Indian work authorization, and the rules on employment visas, registration and thresholds are covered in our employer's guide to India work permits and visas. For a role you are filling with someone already resident in India, none of it applies.

What changes when you employ in India versus the US?

Three things work differently from a US hire, and each trips up employers who assume the home playbook carries over. None is a reason to avoid India; each is something to get right in the contract and the budget on day one.

• No at-will employment: India does not recognize at-will termination. You cannot end the relationship with two weeks' notice and no cause the way most US states allow. Notice, grounds and severance for longer-tenured staff are fixed by contract and state law. See how termination works for India employees.
• A real employment contract, not an offer letter: an Indian agreement must carry statutory benefits, notice, leave, IP assignment and governing law, executed to Indian requirements. A US offer letter with the currency swapped will not hold up. See what an India employment contract must include.
• Statutory benefits are not optional perks: provident fund, ESI where it applies, gratuity after continued service, and paid statutory leave are legal entitlements, not benefits you design. They are already in the cost table above.

How do you get your first India hire onboarded and paid?

Six steps, in this order. The sequence matters because two of them have long lead times you cannot compress, and the mistake we see most often is starting the compliance work after the offer is accepted rather than alongside the search.

1. Scope the role and the salary band: define the level, the city and the total annual package before you talk to anyone, because Indian compensation is negotiated as an annual figure and the band moves sharply between Bangalore, Hyderabad and a tier-two city. Our hub on how to hire employees in India covers sourcing.
2. Pick the route: EOR, your own entity, or contractor, using the three cues above. This decides who signs the employment agreement, so it has to be settled before you issue anything.
3. Run the background check: verification in India covers identity, education, prior employment and court records, and the full report takes days rather than minutes. Start it in parallel with the offer, not after. See our India background check guide.
4. Issue an India-compliant offer and employment agreement: salary in rupees, notice period, statutory benefits, leave entitlement, IP assignment, confidentiality and non-solicit. A US offer letter with the currency swapped is not an Indian employment contract and will not hold up.
5. Onboard and register: enroll the employee for provident fund and ESI where applicable, register for professional tax in their state, collect tax declarations, and enroll them in health cover. This is the step where an EOR's existing registrations save you the months an entity would spend.
6. Ship the equipment and run the first pay cycle: getting a laptop to an Indian address from the US is a customs and logistics job, and it is an EOR add-on rather than something you should solve yourself. We cover it in equipping remote employees in India.

On timing, the honest answer is that we are rarely the bottleneck. Onboarding on our side runs in days once documents are in. The date that actually moves is the candidate's notice period at their current Indian employer, commonly one to three months, which is why we tell US clients to run the search a quarter ahead of when they want the person productive. The rules on notice periods for EOR employees in India explain what is negotiable and what is not.

How does Wisemonk help US companies hire and pay people in India?

Wisemonk is an India-native Employer of Record. We help global companies hire, pay and manage employees in India without setting up a local entity, and India is the only country we operate in, which is why we can answer a professional tax question about Karnataka rather than routing it to a partner. We work with 300+ global clients, manage 2,000+ employees on payroll, and process $20M+ in annual payroll, with a 4.8/5 rating on G2.

For a US company with no Indian presence, three of our services are relevant here.

• Employer of Record: we become the legal employer through our own Indian entity and run payroll, provident fund, ESI, TDS and benefits, from $99 per employee per month, with equipment procurement and shipping available as an add-on.
• Contractor of Record: we become the contracting party for genuine Indian contractors, with compliant agreements, IP assignment, classification review and payouts, at 6% per contractor payment.
• Entity setup: when India becomes permanent, we incorporate and register the company and move the team across, priced on a custom quote.

Full scope sits on our Employer of Record service page.

We came across Wisemonk and met with the CEO and staff to explain our situation, and were very impressed with their customer-focused approach to their business. Wisemonk onboarded all of my employees in one or two days. They paid my employees' salaries on the day after my payment cleared. Needless to say, my employees and I were very satisfied with their service then and remain so over a year later. We are an American company, so I was very happy to see that they have a US bank account where I can make ACH payments to minimize bank charges. All salary payments are timely. They worked directly with my employees to enroll them in the health care program and explain any coverage-related issues. The best part is that we get to work with a dedicated person assigned to our company. I would highly recommend Wisemonk and think of them as our Indian HR department.
- Frank Menes, Founder & CEO at Senem RFP