India payroll for a US company — the operations playbook

Indian payroll is not US payroll with a different currency. The statutory deductions are different, the filing cadence is different, the documents employees expect are different, and the year-end ceremony (Form 16) doesn't have a US equivalent. The good news: it's all rules-based and well-documented; once you've run a quarter, the next quarter is muscle memory.

The two decisions that drive everything

Before you can do anything operational, you settle two things.

1. EOR or own subsidiary? Under 15 hires — almost always EOR. 15-30 — toss-up; start subsidiary setup in parallel. 30+ — subsidiary. The crossover is documented in our EOR-vs-own-entity post.
2. Which Indian state(s)? The state your engineers sit in determines Shops Act registration, Professional Tax slabs, and a handful of leave / public-holiday conventions. Multi-state means parallel registrations. Don't merge it into one Bengaluru filing if half your team is in Hyderabad.

The registration stack (subsidiary route)

Once your Pvt Ltd is incorporated, you need this stack live before payroll-go-live. If you're on EOR, your EOR has these already.

• PAN of the company (auto-allotted with CoI under SPICe+).
• TAN — Tax deduction Account Number, needed for TDS remittance.
• GSTIN — goods and services tax registration.
• PF establishment code — apply once you cross 20 employees (or voluntarily earlier).
• ESI code — apply once 10 employees with anyone below the ESI wage ceiling.
• Professional Tax (Employer) enrolment — state-specific.
• Shops & Establishments Act registration — state-specific.

What the monthly cycle actually looks like

Indian payroll runs on a strict month-end model. Salary for May is computed in early June, paid by 7 June, statutory deposits cleared by mid-month, returns filed quarterly. Here is the calendar from a US-HQ vantage point.

The year-end ceremony — Form 16

By 15 June every year, every employee receives Form 16 (or, from FY 2026-27 onwards, Form 130) — the consolidated TDS certificate they use to file their Indian income tax return. The form has two parts: Part A is generated by TRACES from your quarterly 24Q returns, Part B is generated by your payroll system. Both bear the deductor's signature.

Errors here travel — to the employee's CA, to the tax department's matching system, and onward to investor due diligence. The most common errors: PAN mismatch (employee's PAN on Form 16 doesn't match their tax file), mismatch between Part B totals and the 24Q quarterly return, and naming the form 'Form 16' when it should be 'Form 130' for the new ITA 2025 framework.

Reporting in USD for the US parent

Your US CFO wants to see Indian payroll in USD on the consolidation model. The clean approach:

• Maintain INR ledger in your Indian books (mandatory — Companies Act and tax records are in INR).
• Translate to USD using a monthly average rate (RBI reference or your group rate policy) for management reporting.
• Translate to USD at year-end at the closing rate for the consolidation, with cumulative-translation-adjustment captured in OCI per US GAAP.
• Reconcile against the FX rate at which your US parent funded the Indian subsidiary — track the gain / loss separately.

Funding the Indian subsidiary

You'll wire USD from the US parent to the Indian operating account periodically — to cover salary, statutory deposits, vendor payments. The first wire is the share subscription (capital infusion); subsequent wires can be additional capital infusions, intercompany loans, or service-fee remittances against an MSA.

• Capital infusions need FC-GPR filing with RBI within 30 days of share allotment.
• Intercompany loans need External Commercial Borrowing (ECB) compliance — caps, interest rate ceilings, repayment terms specified by RBI.
• Service-fee remittances against an MSA are not capital — they're paid as services and are normal trading flows. Most preferable structure for ongoing funding.