Employees working abroad: Indian employer duties
Reviewed by Mellow Editorial Team, HR & payroll content team
Sending an employee abroad — or hiring someone already overseas — does not end your obligations as an Indian employer. Indian labour, tax and social-security rules can follow an employee across a border, and the host country adds its own layer on top.
Who this applies to
Two situations create most of the complexity for Indian employers:
Deputation abroad. An Indian employee on your payroll is sent to work in another country for a fixed period. The employment contract stays with you; they remain on Indian payroll.
Remote hire overseas. You hire someone who lives abroad — sometimes a foreign national, sometimes an Indian citizen who has moved — and want to keep them on your Indian entity's payroll for convenience.
The duties differ in each case, but the starting point is the same: identify the applicable law in both countries before you process a single salary.
Indian tax obligations when an employee works overseas
For a deputee whose salary is paid from India, you remain the deducting employer. TDS must be deducted at source under the Indian Income Tax Act if the income is taxable in India. Whether it actually is taxable depends on the employee's residential status for that financial year — an area where rules around days of presence matter a great deal. That determination is the employee's, but you carry the withholding liability if you get it wrong.
You continue to file Form 24Q quarterly and issue Form 16 at year end for any salary that is assessable in India. If the employee is not tax-resident in India for 2026/27, their Indian-sourced income may still attract tax, but overseas income generally will not. Consult a tax adviser before reducing or stopping TDS on an overseas deputee's salary.
India has Double Taxation Avoidance Agreements (DTAAs) with many countries. These can reduce withholding obligations in one country or the other, but claiming DTAA relief requires formal documentation — a Tax Residency Certificate is the usual starting point.
Provident Fund and social security
EPF contributions are 12% from the employee and 12% from the employer on applicable wages. Whether these continue during an overseas assignment depends on whether the employee remains a member of the EPF scheme and whether India has a Social Security Agreement (SSA) with the host country.
India has SSAs with a growing list of countries. Where an SSA is in place, a Certificate of Coverage issued by EPFO exempts the employee from contributing to the host country's social security system. Without an SSA, the employee may end up contributing to both systems — a significant cost that should be factored into your assignment budget.
For an employee hired abroad who was never on Indian payroll before, EPF membership may not apply, but take advice if you are adding them to your Indian entity's payroll.
ESI applies for employees below the applicable wage threshold and where the establishment is covered. For most overseas assignments, the practical coverage question is whether the employee can actually access ESI benefits from abroad — usually they cannot, which raises a separate duty to arrange adequate health cover.
Labour law and the four Labour Codes
India's four consolidated Labour Codes — covering wages, industrial relations, social security, and occupational safety — are in force from 2025. These apply to employment contracts governed by Indian law. If your standard employment contract is Indian-law governed, the Code on Wages, the definition of "wages" for statutory purposes, and notice and termination rules under the Industrial Relations Code all remain relevant even when the employee is physically abroad.
The host country also has employment law. In most jurisdictions, local law applies to anyone working there, regardless of the nationality of their employer or the governing law of their contract. This means an overseas deputee may have rights — to minimum wage, paid leave, anti-discrimination protection — under host-country law that sit alongside their Indian employment terms. This is a legal question specific to each country and should be reviewed with local counsel.
Practical steps before the assignment starts
Get the residential-status analysis done early. A tax adviser should model the employee's day-count position for the financial year so you know whether to continue, reduce or halt TDS.
Obtain a Certificate of Coverage from EPFO if an SSA exists with the host country. Do this before the employee departs — it is far harder to sort out retrospectively.
Review the employment contract. Decide which law governs it, update the clauses on jurisdiction, dispute resolution and applicable benefits, and confirm that host-country mandatory rights are addressed.
Sort out insurance. ESI will not cover an employee working abroad. A suitable international health and medical evacuation policy is a practical necessity and, in some host countries, a legal requirement.
Keep payroll records as though the employee were still in India. Form 24Q, salary registers and TDS calculations must be maintained regardless of where the employee sits.
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