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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