International Payroll: A Complete Guide for US Companies Hiring in India

Running international payroll for an India team looks straightforward until the first payroll cycle runs late, a TDS filing is missed, or an employee flags an error on their payslip. Then it becomes clear that India payroll is not a simplified version of US payroll. It is a different compliance system, with different deadlines, different statutory obligations, and different consequences for getting things wrong.

This guide covers what international payroll in India actually requires in 2026, what changed in the last 12 months, how to structure your India international payroll correctly, and what your options are for managing it without building a compliance team from scratch.

What India International Payroll Actually Involves

International payroll for an India team is not just converting salaries to INR and wiring money. The legal obligations that sit on top of that payment are what most US companies underestimate.

Every month, running India payroll means calculating gross salary including all allowances and approved reimbursements, deducting the employee's statutory contributions, depositing TDS by the 7th of the following month, depositing PF (Provident Fund) and ESIC contributions by the 15th, generating payslips, and filing the monthly PF and ESIC returns.

Quarterly, it means filing Form 24Q, the TDS return on salary, within 15 days of the end of each quarter. Annually, it means issuing Form 130 (previously Form 16) by June 15 for every employee who received a taxable salary during the financial year.

None of these deadlines are approximate. Missing the TDS deposit by a day triggers interest at 1.5% per month. Missing it by weeks triggers a penalty under Section 234E on top of the interest.

International payroll in India is a monthly compliance cycle, not a payment process.

What Changed in 2026 for India International Payroll

Two significant changes hit India international payroll compliance in late 2025 and early 2026. Both affect how US companies structure their India payroll going forward.

The Four Labour Codes (effective November 2025)

India consolidated 29 older labor laws into four codes that came into force across states from late 2025:

The Code on Wages requires that basic salary plus dearness allowance be at least 50% of total CTC. This directly affects international payroll structuring across India. Any international payroll salary structure where basic pay was suppressed to reduce PF contributions, a common practice under the old framework, is now non-compliant. PF is calculated on basic plus DA, so a higher basic means higher PF contributions from both employer and employee.

The Code on Social Security extends PF and ESIC coverage to gig workers, platform workers, and fixed-term employees. For US companies using contract workers alongside full-time employees, this expands the scope of international payroll obligations beyond permanent hires.

The Industrial Relations Code requires that full and final settlement on employee exit be completed within two working days. This compresses the timeline US-managed India teams typically allow for exit processing.

The Occupational Safety Code sets new obligations around working conditions for night shift employees, relevant for India teams supporting US time zones.

The Income Tax Act 2025 (effective April 1, 2026)

The Income Tax Act 1961 was replaced by the Income Tax Act 2025 on April 1, 2026. For international payroll in India, the most important operational change is the section reference for TDS on salary. It moved from Section 192 to Section 392(1). Any payroll software, vendor, or EOR still referencing Section 192 for TDS on salary is filing against a repealed law.

Form 16, the annual TDS certificate that employees use to file their income tax return, has been renamed Form 130 under the new Act. Both terms are in circulation in 2026. For employee-facing communication and payroll documentation, Form 130 is the correct reference for financial years from 2026-27 onward.

The two tax regimes remain in place. The new regime has lower slab rates but fewer deductions. The old regime allows HRA exemption, Section 80C equivalents, and medical insurance deductions. Employees choose their regime at the start of each financial year. International payroll systems must support both and adjust TDS calculations when an employee switches.

The Five Cost Components of India International Payroll

A compliant India international payroll structure has five cost layers. US finance teams planning for India headcount need all five in the budget, not just the salary.

1. Gross salary (CTC) The cost to company agreed with your hire. Under the four Labour Codes, basic salary must be at least 50% of gross CTC. The rest of CTC typically includes HRA, special allowance, and other components.

2. Employer PF contribution 12% of the employee's basic salary plus DA, capped at INR 1,800 per month for employees earning above INR 15,000 in basic wages. For employees earning basic salaries below INR 15,000, the full 12% applies without the cap.

3. Employer ESIC contribution 3.25% of gross wages for employees earning up to INR 21,000 per month gross. Employees above INR 21,000 are not covered and no ESIC contribution applies.

4. Gratuity accrual Approximately 4.81% of basic salary per month, accruing from day one of employment. This is not a monthly deposit to a government body. It is a liability that crystallizes when an employee completes five years of continuous service. International payroll planning needs to provision for it monthly rather than treating it as a future one-time cost.

5. Professional tax A state-level tax on employment income. Rates and applicability vary by state. Maharashtra levies INR 2,500 per year. Karnataka levies INR 2,400 per year. Some states have no professional tax. International payroll systems must handle state-level variation, not apply a single national rate.

The All-In Cost Formula

For planning purposes, total monthly employer cost for an India employee is:

Gross salary + Employer PF (12% of basic) + Employer ESIC (3.25% of gross, if applicable) + Gratuity accrual (~4.81% of basic) + Professional tax (state-dependent)

For a mid-level engineer on INR 1,00,000 gross per month with a basic salary of INR 50,000:

The employer cost is approximately 8 to 9% above gross salary for this profile, lower than most European markets but material for international payroll budgeting.

India International Payroll Deadlines: The Full 2026 Calendar

Missing any of these dates triggers penalties that are backdated, not prospective.

For US companies running India payroll from a US office, these deadlines require an India-side payroll contact or a global payroll services provider with India-specific operations. A US payroll team working US business hours cannot reliably hit a 7th-of-month TDS deposit on IST timelines without dedicated India support.

Three Ways to Run India International Payroll as a US Company

Option 1: Employer of Record (EOR)

An EOR becomes the legal employer of your India hires. The EOR owns the India entity, runs monthly international payroll in INR, files all statutory returns, and handles year-end Form 130 issuance. You manage the work and approve payroll before each run.

EOR is the default for US companies running international payroll in India without their own entity. It removes the entity setup cost ($20,000 to $150,000), compresses onboarding to 48 to 72 hours, and puts the international payroll compliance burden on a provider with existing India-side infrastructure.

At Kaamwork, the EOR fee is $599 per employee per month. International payroll processing, all statutory filings, Form 130 issuance, and termination support are included. Your role in the monthly cycle is approving the payroll summary and flagging any changes before disbursement runs.

Option 2: Global Payroll Services

If you have your own India entity, global payroll services providers manage the monthly payroll cycle on your behalf without becoming the legal employer. They calculate gross-to-net, handle TDS deposits, file PF and ESIC returns, and generate payslips.

The distinction from EOR is critical: global payroll services run payroll under your entity's registrations. You remain the legal employer. The compliance liability stays with you, not the provider. If the global payroll services provider files a return incorrectly, the penalty falls on your entity.

India payroll services of this type are appropriate once your India team is large enough to justify your own entity (typically 20 to 25 employees) but you do not want to build an internal payroll team.

Option 3: In-House India Payroll

Large GCCs with 50 or more India employees sometimes manage payroll through an internal HR and payroll team, using Indian payroll software like GreytHR, Darwinbox, or Keka. This gives the most control but requires hiring India-based payroll specialists, maintaining software subscriptions, and building internal compliance expertise.

For most US companies at seed to Series B stage, the EOR model covers international payroll more cost-effectively than either global payroll services or in-house operations. The crossover point depends on team size and the internal HR bandwidth available.

→ See how India payroll runs month by month on the Kaamwork model: kaam.work/blog/how-payroll-actually-runs-in-india-a-month-by-month-breakdown

What Global Payroll Services for India International Payroll Should Cover

Whether you use an EOR or a dedicated global payroll services provider, the scope of India international payroll support should cover these elements as standard.

Monthly payroll calculation including gross-to-net, statutory deductions, and reimbursement processing. Salary structuring guidance that aligns with the 50% basic rule under the four Labour Codes. TDS computation under the correct regime for each employee. Monthly statutory deposits by the correct deadlines. Quarterly Form 24Q filing. Annual Form 130 issuance by June 15. Full and final settlement processing within two working days of exit under the Industrial Relations Code. State-specific professional tax filing.

A global payroll services provider running India international payroll as one market among 100 may not provide all of this at the depth India-specific compliance requires. Salary structuring expertise, state-level professional tax handling, and exit settlement processing within two working days are the details that generic international payroll platforms often lag on.

FX and Currency: The Hidden Cost in India International Payroll

International payroll in India runs in INR. If you fund payroll from a US bank account, every payroll cycle involves an FX conversion. The conversion cost is not trivial at scale.

Banks typically charge 1.5% to 3% above mid-market exchange rate on INR conversions. Specialist FX providers bring that down to 0.3% to 0.8%. On a $50,000 monthly payroll run for a 15-person India team, the difference between a bank FX rate and a specialist provider rate is $350 to $1,100 per month, or $4,200 to $13,200 per year.

International payroll providers and EORs handle FX conversion as part of their service for India international payroll. The FX markup they apply varies. Some providers publish their markup. Others build it silently into the invoice. Ask explicitly before you sign: "What is your FX conversion policy and what markup do you charge above mid-market for India international payroll?"

Frequently Asked Questions

1. What is international payroll and how does it work in India? International payroll is the process of paying employees in another country while complying with that country's tax, statutory, and labor requirements. In India, international payroll means running monthly payroll in INR, deducting TDS, depositing PF and ESIC contributions by fixed deadlines, filing quarterly returns, and issuing Form 130 annually. US companies without an Indian entity typically run India international payroll through an EOR. Those with their own entity use global payroll services or an in-house team.
2. What are global payroll services and do they cover India statutory contributions?
   Global payroll services providers manage payroll calculations, statutory filings, and compliance across multiple countries from a single platform. For India, global payroll services should cover TDS computation and deposit, PF and ESIC filings, professional tax by state, and Form 130 issuance. Statutory contributions themselves are not the provider's cost, they pass through to you as the employer. Global payroll services manage the process; you pay the contributions.
3. What is the difference between global payroll services and an EOR for India?
   EOR is the legal employer. It owns an India entity, employs your hires in its own name, and carries the statutory compliance liability. Global payroll services run payroll under your entity's registrations. You stay the legal employer. EOR is the right model if you have no India entity. Global payroll services apply if you have your own entity and need payroll administration support.
4. What changed in India payroll compliance in 2026?
   Two changes matter most. The four Labour Codes, active from late 2025, require basic salary to be at least 50% of CTC, extend PF and ESIC to gig and fixed-term workers, and require exit settlements within two working days. The Income Tax Act 2025, effective April 1, 2026, moved TDS on salary from Section 192 to Section 392(1) and renamed Form 16 to Form 130. Any international payroll system still referencing Section 192 is non-compliant.
5. What are India payroll services and when do I need them?
   India payroll services are specialist providers that manage the India payroll compliance cycle, either as your legal employer (EOR) or on behalf of your India entity (payroll outsourcing). You need India payroll services when your team grows beyond what your US HR team can manage across time zones, or when India-specific compliance depth, state-level professional tax, salary structuring under the Labour Codes, or export of payroll data into your finance systems requires local expertise.
6. How much does international payroll in India cost?
   The total monthly cost per India employee is gross salary plus employer-side statutory contributions (approximately 8 to 12% of gross salary depending on basic pay structure and state) plus any EOR or global payroll services fee. For a mid-level engineer at INR 1,00,000 gross, the employer's total monthly cost is approximately INR 1,08,000 to INR 1,12,000. Add $599 per month if you use an EOR, or a comparable fee for global payroll services if you have your own entity.
7. Can I run India international payroll from the US without an India entity?
   You cannot legally employ someone in India and run payroll without either an India entity or an EOR. Paying an individual in India as a contractor avoids payroll obligations for that specific person but creates misclassification risk if the relationship functions as employment. For full-time employees, either set up an India entity (three to six months, $20,000 to $150,000) or use an EOR (48 to 72 hours, $599 per month per employee at Kaamwork).

The Bottom Line

International payroll in India is manageable. The international payroll compliance cycle is fixed and predictable: TDS by the 7th, PF and ESIC by the 15th, quarterly Form 24Q, annual Form 130 by June 15. The 2026 changes to section references under the new Income Tax Act and the 50% basic rule under the Labour Codes are the two updates every India international payroll process needs to reflect now.

The question is not whether you can run India payroll correctly. It is whether you have the right infrastructure to run it correctly every month, on Indian statutory deadlines, from a US office.

For most US companies at seed to Series B stage, an EOR handling India international payroll is more cost-effective and more reliable than either global payroll services or in-house operations. The crossover to your own entity makes sense at 20 to 25 employees, and quality EOR providers support that international payroll transition when you get there.

For US and UK companies that want India international payroll handled correctly from the first hire: kaam.work