• Working for a foreign company as an employee

Hi,

Is a foreign company allowed to recruit "employees" in India ? The general answers I see online are that it is not possible and the alternatives are to hire as a independent consultant or go through a EOR.

I am unable to find the official source for this. 

Also, the ITR 2 form allows you to enter a foreign company's details under "Employer" information - which implies that there is nothing wrong with the arrangement ?

Please advise.

Thank you. 

Best Regards 
RR
Asked 1 month ago in Income Tax

Foreign Company can recruit employees in India. Salary earned by services rendered in India by a resident employee are taxable in India. Foreign Co. may deduct TDS (i.e. withholding tax) in their jurisdiction depending on the provisions of  DTAA and local income tax act. While filing return of income in India, the employee will get the benefit of tax paid in the employer country in the form of FTC (i.e. Foreign tax Credit). The employee should estimate the tax liability in advance and if there is shortfall in TDS/WHT deduction pay advance tax on the due dates. Such arrangement is discouraged due to the concept of POEM (Place of Permanent establishment). Usually employees are hired as independent consultant or the employer should have a permanent establishment in India. Generally the holding/parent Co. incorporates subsidiary companies and such subsidiaries employ employees on their payroll.

 

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Vivek Kumar Arora
CA, Delhi
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A foreign company can recruit employees in India, but it's complex due to Indian tax and labor laws. They need to handle tax deductions and may face double taxation issues, which can be mitigated through the Double Taxation Avoidance Agreement (DTAA). Often, foreign companies opt for simpler methods like hiring through an Employer of Record (EOR), as independent consultants, or by setting up a subsidiary in India.

 

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Shubham Goyal

Shubham Goyal
CA, Delhi
177 Answers
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Yes it is generally allowed to recruit employee in India. However, it need to comply with all requirement in India with regard to deducting TDS, labour law etc.

 

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Naman Maloo
CA, Jaipur
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96 Consultations

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