Hiring in India from Abroad: Employer of Record or Your Own Entity

Your options at a glance

There are five common ways to have people working for you in India. They differ in what you can do, what you must set up and what you are responsible for.

Employer of Record or your own entity?

An EOR is the fastest way to start: there is nothing to incorporate, and the EOR is the legal employer responsible for statutory compliance. Using one is lawful in India ²¹. It suits a first few hires, testing the market, or hiring in a city where you will not have an office.

Your own entity becomes the better choice when the team grows, when you need to sign contracts and invoice in India, or when you want full control of employment terms, benefits and equity. It brings its own compliance: annual filings, statutory audit, tax and transfer pricing.

Two risks apply whichever route you choose. First, treating people as contractors when you control their work like employees can lead to claims against you ²¹. Second, people working for you in India can create a taxable "permanent establishment" for the foreign company in some circumstances; India's Supreme Court took a broad view of this in 2025 ²². Take tax advice on how your India team is set up and what it does.

Foreign investment rules

Most sectors are open to 100% foreign direct investment under the automatic route, which needs no prior government approval ⁴. Some strategic sectors have caps or need approval.

Investors from countries that share a land border with India, or whose beneficial owner is in or a citizen of such a country, need government approval ⁵. Since March 2026, non-controlling beneficial stakes of up to 10% from those countries can come through the automatic route ⁶.

After shares are issued to the foreign parent, the company must report it to the RBI on Form FC-GPR within 30 days of allotment ³.

Setting up a subsidiary: the steps

• Check the foreign investment route for your sector and investors ⁴⁵.
• Get digital signatures and director identification numbers for the directors. At least one director must have stayed in India for 182 days or more in the financial year ¹.
• File SPICe+, the government's combined form. It covers name reservation, incorporation, director numbers, PAN and TAN, provident fund and state insurance registration, a bank account and, optionally, GST registration ⁷.
• Expect about 15 to 30 days from digital signatures to an open bank account, in one law firm's experience ⁸.
• Within 30 days of incorporation, the board appoints the first auditor ¹⁰. Within 180 days, a director files a declaration of commencement of business ⁹.
• Report the share allotment to the RBI on Form FC-GPR within 30 days ³.

Tax for your Indian entity

India's new Income-tax Act, 2025 has applied since 1 April 2026, replacing the 1961 Act ¹¹. Domestic companies can opt for a concessional corporate tax rate of 22% before surcharge and cess; otherwise the base rate is 25% or 30% depending on turnover, and a foreign company taxed in India through a branch or permanent establishment pays a base rate of 35% ¹².

Transactions between your Indian entity and the parent or other group companies, such as service fees, must be priced at arm's length and documented every year ¹³.

What employing someone in India costs

Whether you hire through an EOR or your own entity, the same statutory costs apply on top of salary. The main ones:

Bringing foreign nationals to India

Foreign nationals working in India need an employment visa, which generally requires a salary above $25,000 a year, with a few exceptions ²³. India's new Immigration and Foreigners Act, 2025 and its rules came into effect on 1 September 2025 ²⁴, so check the current registration requirements before travel.

Employee data and privacy

India's Digital Personal Data Protection Act allows employers to process personal data for employment purposes ³⁰. The DPDP Rules were notified in November 2025 with an 18-month phased timeline ³¹. Transfers of personal data abroad are generally permitted unless the government restricts a country, and that rule is expected to take effect in May 2027 ³².

Why companies are building teams in India

Foreign direct investment equity inflows into India rose 18% in 2025-26 to $58.84 billion, with Singapore and the US the largest sources ²⁷²⁸. India hosts 2,117 global capability centres employing about 2.36 million people ²⁹.

From EOR to your own entity

Many companies start on an EOR and move people to their own entity later. Our suggestions for a smooth move:

• Plan the move around a payroll month end, so salary, tax deductions and provident fund contributions transfer cleanly.
• Agree in writing how service will be counted for gratuity and leave, and tell employees before the change.
• Issue new appointment letters from your entity on terms at least as good as before.
• Take legal and tax advice on the transfer; the details depend on your EOR contract and your entity's set-up.

How HyrEzy helps

HyrEzy finds and evaluates the people, and can have them employed through its Employer of Record service until you have your own entity. As you grow, we support your team with HRMS and payroll, background verification and leadership search. We do not incorporate companies; for that, work with a company secretary or law firm in India.