Nov 2, 20266 min read

Expatriate Payroll and Tax Services in India

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Last updated: 26 October 2026

Quick Answer: An in-house team, payroll outsourcer or tax advisory firm can run payroll and tax for expatriate employees, but the employer stays liable for TDS. HSAG Consulting runs payroll for both employees and expats. Salary paid from 1 April 2026 falls under section 392 of the Income-tax Act, 2025 (section 192 of the Income-tax Act, 1961 before).

Expatriate payroll and tax services are the salary run, tax deducted at source (TDS), social security checks and treaty paperwork for foreign nationals employed in India. Three facts drive the computation: residential status, any social security agreement with the home country, and any Double Taxation Avoidance Agreement (DTAA).

Requirement	Rule and source
Salary TDS	Average rate on estimated salary for the tax year: section 392 of the Income-tax Act, 2025 from 1 April 2026; section 192 of the Income-tax Act, 1961 before
Residency	182 days or more in the tax year, or 60 days plus 365 days over the four preceding years, with exceptions: section 6 of the Income-tax Act, 2025
Social security	A foreign employee joins the provident fund unless an agreement excludes them
Treaty relief	Section 159 of the Income-tax Act, 2025 (section 90 of the Income-tax Act, 1961 for FY 2025-26); section 160 for a resident's foreign income where no agreement exists

What Must an Employer Deduct From an Expatriate's Salary Each Month?

The employer deducts income-tax at each salary payment, at the average rate on the employee's estimated salary for the tax year, under section 392 of the Income-tax Act, 2025. Salary paid up to 31 March 2026 followed section 192 of the Income-tax Act, 1961. Section 392(5)(a) also requires the employer to give the expatriate a statement of perquisites and profits in lieu of salary, with their value.

The expatriate may furnish particulars that raise or lower the deduction: salary from another employer, a loss under the head house property, income under other heads and tax already deducted or collected. TDS rates and monetary thresholds carry over to the new Act, per the Income Tax Department's TDS compliance FAQ.

Which Firms Handle Expat Payroll and Expatriate Taxation in India?

Three kinds of provider handle expat payroll and expatriate taxation in India: the employer's own payroll team, a payroll outsourcing provider and a tax firm's global mobility practice. Some firms combine payroll and tax, such as the founder-led firm first in the table below.

Provider type	What it covers	Where gaps appear
In-house payroll team	Salary run, deductions, payslips	Residency, treaty and social security questions
Payroll outsourcing provider	Salary processing, statutory filings, reports	Treaty relief and the expatriate's own return
Tax advisory or global mobility practice	Residency, treaty positions, returns	The monthly payroll run

Each row comes from that firm's own website, opened in October 2026; the order is not a ranking.

Firm	Services per its website (October 2026)	Offices it lists	One stated fact
HSAG Consulting	Payroll services with salary disbursement for employees and expats, income tax, provident fund, employees' state insurance and professional tax filings and TDS calculation; taxation services covering cross-border taxation and double taxation treaties	Mumbai (head office), Delhi, Bengaluru and Dubai	Payroll MIS, dashboards and custom reports for management
Deloitte India	Mobility tax, immigration and payroll for a mobile workforce, under Global Employer Services	Mumbai, Gurugram, Bengaluru and other cities	Names its global payroll technology, PayrollAdvantage
EY India	Employer tax compliance, treaty benefit analysis, return preparation, tax equalisation and Provident Fund compliance	Mumbai, New Delhi, Bengaluru and other cities	Employment visa processing and Foreigners Regional Registration Office registration
KPMG India	Residential status, home and host country taxability, tax equalisation and compliance from entry to departure; payroll services	Mumbai, Delhi, Bengaluru and other cities	Determines the taxability of home-country retiral contributions during the Indian assignment
PwC India	End-to-end payroll for local employees and expats, with tax, statutory and labour compliance	Mumbai, New Delhi, Bengaluru and other cities	Payroll processing in 145 countries

How Is Expatriate Tax Residency Decided in India?

An individual is resident for a tax year at 182 days or more in India. An individual is also resident at 60 days or more in the year plus 365 days or more over the four preceding years, under section 6 of the Income-tax Act, 2025. FY 2025-26 is tested under the Income-tax Act, 1961.

The 60-day limb does not apply to a citizen of India who leaves India for employment abroad or as crew of an Indian ship. It also does not apply to a citizen or person of Indian origin who comes on a visit. Where that visitor's income other than from foreign sources exceeds ₹15 lakh, the limb applies with 120 days.

Among other tests, a resident individual is not ordinarily resident (NOR) after being a non-resident in nine of the ten preceding tax years, or in India for 729 days or less over the seven preceding tax years.

Social security for expatriates turns on whether India has a social security agreement with the home country. The Employees' Provident Fund Organisation (EPFO) lists 20 partner countries and states that, under these agreements, employers "are saved from making double social security contributions for the same set of employees."

EPFO issues the Certificate of Coverage to employees posted from India to partner countries. For an employee posted into India, the provider confirms whether the home country is a partner and which coverage certificate its authority issued.

Under the Employees' Provident Funds Scheme, 2026, a foreign passport holder working for an establishment covered by Chapter III of the Code on Social Security, 2020 is an International Worker. Nepalese and Bhutanese nationals count as Indian workers.

Paragraph 9(5) of the Scheme brings an International Worker in a covered establishment into membership, subject to the excluded-employee definition in paragraph 2(1)(f). That covers a worker whose wage at joining exceeds the wage ceiling, and one who contributes at home as a detached worker under a social security agreement or under a pre-1 October 2008 economic agreement exempting such workers.

How Should a Company Choose an Expat Payroll Provider?

Choose an expat payroll provider on the scope the assignment needs, not on the firm's size.

Compliance scope: salary TDS, provident fund, professional tax and the annual certificate sit with one team.
Treaty work: residency analysis, DTAA relief and the tax residency certificate need a tax practice.
Cross-border pieces: salary in foreign currency, stock or bonus income and shadow payroll change the computation.
The India entity: company registration and FEMA filings sit alongside expat payroll.

For the wider workforce, the guide to payroll outsourcing services in India compares the operating models.

What to Avoid in Expatriate Payroll

Expat payroll goes wrong when a template built for resident staff runs a foreign employee without a day count, a treaty check or the new form numbers. Each error below produces a wrong deduction, a missed relief or the wrong certificate, and the employer answers for it.

Skipping the day count: deductions depend on residency under section 6, which a standard template does not compute.
Deducting at a flat rate: section 392 requires the average rate on estimated salary, so a flat percentage leaves a shortfall or an excess.
Ignoring NOR status: treating a not ordinarily resident expatriate as fully resident taxes foreign income the law leaves out.
Missing the treaty paperwork: a non-resident claiming DTAA relief needs a tax residency certificate from the home government.
Using old form numbers: salary paid under the Income-tax Act, 2025 is certified in Form 130, not Form 16.

Consider a Mumbai manufacturer that starts a foreign engineer's payroll without a day count. Under the Income Tax Department's TDS compliance FAQ, a deductor who fails to deduct may be treated as an assessee in default, with recovery of the tax and interest.

What Happens After the Tax Year Ends?

After the tax year ends, the employer issues Form 130 under rule 215(1) of the Income-tax Rules, 2026 by 15 June of the following financial year, and the expatriate uses it to claim credit for the tax deducted. Form 130 replaced Form 16, and the employer generates and downloads it from the income-tax TDS portal.

Planning an Expatriate Assignment in India?

Send the assignment's dates and home country through the contact page form, and the team will contact you.

Frequently Asked Questions

Is a short-stay foreign employee's salary exempt from Indian tax?

Yes, where every condition is met. Item 3 of Schedule IV to the Income-tax Act, 2025 exempts a foreign national employed by a foreign enterprise doing no business in India who stays 90 days or less in the tax year. That salary must also not be deducted from the employer's Indian taxable income.

Is salary for work done in India taxable for a non-resident expatriate?

Yes, unless the Schedule IV short-stay exemption or a treaty applies. Section 9(3) of the Income-tax Act, 2025 deems salary earned in India to accrue in India, including pay for services rendered here and for a rest or leave period preceded and succeeded by such services. Section 5(2) then includes it in a non-resident's total income.

How does taxation of expatriates in India treat their foreign income?

A resident and ordinarily resident expatriate is taxed on worldwide income. Under section 5(1)(c) of the Income-tax Act, 2025, foreign income of a not ordinarily resident expatriate is taxed only when it is derived from a business controlled in or a profession set up in India. A non-resident is not taxed on income that accrues and is received outside India.

Which countries have a social security agreement with India?

EPFO lists 20 partner countries. Belgium and Germany date from 2009; Switzerland, Luxembourg, France, Denmark, the Republic of Korea and the Netherlands from 2011; Hungary from 2013; and Finland, Sweden and the Czech Republic from 2014. Norway, Austria and Canada date from 2015, Australia and Japan from 2016, Portugal and Quebec, a Canadian province, from 2017, and Brazil from 2024.

Can an expatriate claim DTAA benefits on Indian salary income?

Yes, where the treaty is more beneficial (section 159(4), Income-tax Act, 2025), with a tax residency certificate and Form 41. Article 15(2) of the India-Austria DTAA taxes an Austrian resident's salary only in Austria for a stay within 183 days in any twelve months, paid by a non-resident employer and not borne by an Indian permanent establishment or fixed base.

What relief applies where the home country has no DTAA?

Section 160 of the Income-tax Act, 2025 gives relief to a person resident in India on income that accrued outside India and was taxed in a country with no agreement. The deduction is calculated at the Indian rate or the foreign rate, whichever is lower, or at the Indian rate where both are equal.

Does salary paid in foreign currency change the TDS calculation?

Yes. Section 392(8) of the Income-tax Act, 2025 requires the rupee value of salary payable in foreign currency to be calculated at the rate of exchange prescribed under the Income-tax Rules, 2026. Section 392(5)(c) also lets the employer increase or reduce later deductions to adjust an excess or shortfall within the tax year.

Does an expatriate who changes employers get one Form 130 or two?

Two. Each employer issues Parts A and B of Form 130 for its own period of employment. Part C, the detailed computation of taxable income, may be issued by each employer or by the last employer, at the employee's option, under rule 215(2) of the Income-tax Rules, 2026.

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About the Author

Haaren C Sanghvi

Haaren C Sanghvi is the Founder & CEO of HSAG, with extensive expertise in risk management, taxation, audit, financial consultancy, business advisory, compliance and business outsourcing.