Employer of Record India, hire from abroad without an Indian entity.

EOR is right if:

• 1-15 Indian hires over next 12-24 months.
• Early market exploration; India is one of several hiring geographies.
• Need to onboard a specific candidate quickly (1-3 weeks).
• Don't want to deal with Indian compliance (payroll, PF, ESI, PT, gratuity, labour law).

Own Indian subsidiary (Pvt Ltd WOS) is right if:

• 15+ Indian hires or multi-year India plan.
• Need to invoice Indian customers (EOR doesn't give you an invoicing entity).
• Want direct ESOP grants to Indian employees (easier via Indian subsidiary).
• Want to control the brand presence / IP / data residency in India.
• Need to amortise setup cost over longer horizon.

Cost comparison (rough):

• EOR: ~USD 100-300/employee/month fee + employee cost. For 10 engineers at USD 20K/year each, EOR cost ~USD 15-30K/year.
• Own subsidiary: setup USD 2-5K one-time + annual compliance USD 5-10K/year + optional resident director nominee USD 2-3K/year. Break-even vs EOR around 8-12 Indian hires.

• Employment contract: EOR issues to employee; mirrors foreign hirer's commercial terms. India-compliant (Shops & Establishment, applicable state's labour laws).
• Monthly payroll: compute gross → deductions (PF 12% + ESI 0.75% if applicable + PT state-specific) → TDS Section 192 → net pay. Credit on 1st of month.
• PF (Provident Fund): 12% employer + 12% employee contribution. EOR files Form 5 (new employee) + ECR (electronic challan return) monthly.
• ESI: if applicable (gross salary <= INR 21,000/month, often not applicable for mid-senior roles).
• Professional Tax: state-specific, max INR 2,500/year.
• TDS Section 192: monthly deduction + quarterly Form 24Q filing.
• Gratuity: provision in books; payable on exit after 5 years of continuous service.
• Form 16: issued to employee annually (by 15 June).
• Statutory compliance: labour welfare fund, bonus, leave encashment, maternity benefit, Shops & Establishment renewal, labour returns.

EOR assumes the Indian employee works 'for' the foreign company. The foreign company pays, directs work, provides tools. India's tax authority can argue:

• Dependent Agent PE: Indian employee habitually concludes contracts in India on behalf of foreign company → Dependent Agent PE under Article 5 of most DTAAs → foreign company has Indian taxable presence → profit attribution + Indian corporate tax.
• Service PE: Indian employees provide services in India to foreign group companies for > specified days per 12-month period (varies by treaty, 90 days in India-US DTAA, 183 days in some others) → Service PE → same consequence.
• Fixed Place PE: if Indian employee works from a specific premises (foreign company's leased office, cowork) and this is held at foreign company's disposal → Fixed Place PE.

Risk mitigation:

• Keep Indian employees in support / development roles, not sales / contract-signing.
• Decision-making authority stays with foreign HQ.
• Avoid giving Indian employees authority to bind foreign company contractually.
• Document role as 'back-office support' / 'development'.
• Review PE risk annually with tax advisor.

For sales / client-facing / contract-authority roles, own Indian subsidiary is safer than EOR (because invoicing is through the Indian entity).

Instead of EOR, foreign company can engage Indian individuals as independent contractors:

• Contract directly with Indian individual as consultant / freelancer.
• Pay via wire / wire aggregator / PayPal / Deel / Wise.
• Contractor is self-employed; files own Indian ITR, pays own tax + GST (if applicable).
• No PF / ESI / Section 192 TDS obligation on foreign company.

But:

• Mis-classification risk: if the arrangement is really an employment (regular hours, exclusive, directed work, tools provided), labour authority can re-characterise as employment → back-dated PF + ESI + gratuity + Section 192 TDS.
• GST risk: if contractor's turnover exceeds INR 20 lakh / 40 lakh threshold, they must register for GST + charge GST on invoice. If export of service under GST rules (place of supply outside India, payment in foreign currency, zero-rated), LUT bond + no IGST charged.
• No employee benefits: contractor has no gratuity, no PF, no leave encashment, no bonus — may limit ability to hire mid-senior talent.

• Compliance track record: PF / ESI / Section 192 TDS on time, Form 24Q filed quarterly without defaults.
• Transparency: itemised monthly invoice (base pay / PF / ESI / PT / TDS / fee).
• Payroll portal: employee can see payslip + Form 16 + PF balance.
• HR support: offer letters, onboarding, policy drafts, exit handling.
• Legal support: labour law notice handling, PE-risk analysis, specific-event advisory (maternity, resignation, PIP).
• Scale: can grow with you from 1 to 50+ Indian hires without renegotiation.

BQP offers EOR + CA + tax integrated: one firm handling India payroll, India tax compliance, India ROC compliance, and ready to transition to own-subsidiary when scale justifies it.

Last updated: 2026-10-13.