How to Run International Payroll for Employees in India [2025]

Running payroll for remote employees in India for the first time? Get it right, and you can hit the ground running with your employees there. But if you miss a step, you could rack up thousands of dollars in penalties—or even risk legal action.

Here’s a step-by-step guide to running payroll in India, with everything you need to get it right every time. 

Table of Contents

• Step #1: Decide whether or not to create your own entity in India

• Step #2: Pick a global payroll software solution

• Step #3: Determine your workers’ employment status

• Step #4: Capture your new hires’ Indian payroll information

• Step #5: Understand the implications of paying in Indian rupees

• Step #6: Run payroll

• Step #7: File your taxes in India

• FAQs about running payroll in India

Step #1: Decide whether or not to create your own entity in India or use an employer of record (EOR)

To hire and pay employees in India, first you need to establish a business entity in India. You can do this by either creating your own local entity or by using what’s known as an “employer of record” (EOR).  

EORs allow you to hire and pay employees through their own entities. They’re responsible for calculating and withholding the appropriate taxes (more on that below), and for paying your taxes to the Indian government. 

When, why, and how do companies use an EOR? 

When companies expand their operations to India—and around the world—they typically use EORs like Deel, Papaya Global, and Rippling to run payroll, issue benefits, and navigate international compliance issues. 

This is because EORs can take months to set up, depending on how you apply, and how long Indian authorities take to review your registration. It’s a significant administrative load, and most smaller companies don’t have the time or resources to spare.

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When, why, and how do companies create their own entity?

If you create your own entity, that replaces the EOR as the legal entity hiring employees and running payroll. Companies typically create their own entities once the costs of an EOR outweigh the costs of creating their own entities.

In most cases, you have to switch systems when you scale—except with Rippling. Rippling’s EOR is built on top of our native payroll rails, which means that when the time comes, you can move from our EOR to Global Payroll through your own entities—in minutes.  

To set up your own entity, you should register your company online with India’s Ministry of Corporate Affairs (MCA) by collecting e-signatures from your directors. Those signees each obtain a Director Identification Number (DIN) and fill out a SPICe form where they submit proposed names and provide company details. 

The Registrar of Companies office reviews the application. If approved, the applicant entity is issued a certificate of incorporation. Once the entity is registered, you can proceed to set up payroll for your Indian employees. 

With Rippling, you can hire and pay Indian employees with either method:

• Rippling offers a native global payroll system, which allows you to pay employees who work in India—and around the world—in a single pay run. 

• We also have our own native EOR service, which allows you to hire and pay employees in India even if you haven’t set up an entity there.

Step #2: Pick a global payroll software solution

First, it’s vital to understand the two kinds of international payroll management solutions: global payroll processors and global payroll aggregators. You can learn about both in our guide.

• Global payroll processors, like Rippling, actually process your payroll, transmit funds, and calculate and file taxes in every country through their own software. Put simply: global payroll processors allow you to pay your international employees just as easily as your local employees: together in a single pay run.

• Global payroll aggregators, like Deel and Papaya Global, aggregate local payroll providers in every country and manually transmit your payroll files to them. These come with many limitations: You’re forced to submit payroll up to 30 days in advance. You can’t track, and automatically sync, employee’s time in the same system.

Remember: Payroll aggregators can’t process payroll through companies that use their own entities. But with native global payroll providers, like Rippling, you won’t have to switch systems as you scale. You can move employees from our EOR to your own local entity, without ripping out and replacing systems to accomplish this.

Step #3: Determine your workers’ employment status

Before onboarding your workers, and certainly before you run payroll, it’s crucial to understand who you’re paying in the eyes of Indian law: Are your workers employees or contractors? 

It’s essential to classify them correctly to avoid big fines. Also, if they’re employees, there are payroll deductions you’re responsible for, including tax obligations and provident fund contributions—see the tables below for the full list.

While no single factor is determinative, the Indian authorities use certain criteria to gauge whether a worker is an employee or a contractor, including:

• The level of control the employer has over the worker's activities

• Who owns their tools and equipment

• Whether they work on an ongoing or per-project basis

• Exclusivity of service

• Degree of integration into your company

• Whether the company can take disciplinary action for misconduct

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Step #4: Capture your new hires’ Indian payroll information

Once you’ve decided whether to use an EOR or your own entity, picked a payroll solution, and ensured that your employees are correctly classified, you should be able to automatically collect (and then pay) your team in India. Just make sure you’re adhering to statutory requirements when calculating each full-time employee’s payroll deductions.

Here’s the information you need to collect:

• Name (matching the account where you’ll deposit their pay).

• Date of birth and date of hire.

• Contact information, including their mailing address in India.

• Bank account information.

• Amount to be paid in INR (including any bonuses).

• Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).

• An account number for the Employee Provident Fund (EPF)

Step #5: Pay in Indian rupees (INR) 

You have to pay India-based employees in Indian rupees (INR).

Of course, there are challenges for companies based outside India that need to pay India-based employees in INR: The exchange rate between your local currency and INR can vary (see exchange rates here). If the rate is unfavorable, you’ll end up paying more USD to cover your employee’s wages. You may also need to account for fluctuations in the exchange rate when calculating your financial statements, which can create accounting complexities.

With Rippling, you can pay everyone in rupees, in minutes, without waiting on transfers or conversion.

Step #6: Run payroll

• You have an entity (either your own or via an EOR), you’ve set up your global payroll system, and you’ve ensured your employees are correctly classified under Indian law.

• Time to run payroll! Here’s a preview of how Rippling’s global payroll system works:

Step #7: File your taxes in India

Once you’re up and running paying your employees in India, you have to withhold a certain amount of taxes. Individual income tax rates vary depending on income. India’s tax slabs are shown below:

Note that taxes on some expenses like salary payments, commissions, rent, interest, and some professional fees are immediately deducted, in a process known as Tax Deducted at Source (TDS). Whoever receives payment has the liability to pay tax to the Income Tax Department.

Rippling can reduce your busy work by automatically calculating and filing your taxes in India.

Frequently asked questions about running payroll in India

Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advise. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.