Hiring in India works differently from Singapore: the contract is regulated by statute and state rules, provident fund and ESI are mandatory for most employees, gratuity builds after service, and notice and termination follow the labour codes, shops and establishment laws and the contract. An Indian subsidiary is the usual employer, running payroll with monthly Withholding Tax on salary, provident fund and ESI. Singapore teams used to CPF and the Employment Act should plan for more statutory components, not fewer.
← Back to the complete guide: How to Set Up a Subsidiary in India from Singapore
Key facts
| Employer | The Indian subsidiary (or an Employer of Record) is the legal employer |
|---|---|
| Contract | Written appointment letter with role, pay structure, notice and confidentiality; state shops and establishments law applies |
| Provident fund | Employer and employee contributions through the EPFO for covered establishments and employees |
| ESI | Health insurance scheme for employees below the wage ceiling, in covered areas |
| Gratuity | Lump sum after continuous service, payable on exit, with a minimum service period |
| Labour codes | The four labour codes were reported to be brought into force on 21 November 2025; state rules and transition steps continue |
| Payroll tax | Withholding Tax on salary under Section 392 of the Income-tax Act, 2025, deposited by the 7th of the following month |
| Equity | Parent shares or options can be offered; taxed as a perquisite on exercise and capital gains on sale |
Singapore and India side by side
| Topic | Singapore practice | Indian practice |
|---|---|---|
| Retirement savings | CPF for citizens and PRs; none for most foreign workers | EPF for covered employees, with contributions from both sides; Singapore citizens are exempt under CECA |
| Health cover | MediShield, employer plans | ESI below a wage ceiling; employer group insurance for others |
| Termination | Notice per contract; retrenchment benefit by norm and tripartite guidelines | Notice per contract and state law; retrenchment compensation for covered workers; limits in establishments with larger headcount |
| Probation | Common | Common; confirm in writing |
| Bonus | Contractual | A statutory bonus applies to eligible employees below a wage ceiling, plus any contractual bonus |
| Leave | Annual and sick leave per Employment Act | Statutory leave varies by state; maternity benefit up to 26 weeks for eligible women |
| Workplace harassment | Workplace Fairness and related laws | Internal Committee under the POSH Act in establishments with ten or more employees |
| Data on employees | PDPA | DPDP Act when the main duties come into force; see the data protection guide |
Pay structure and cost
- Indian pay is split into basic pay, allowances, employer provident fund, gratuity accrual and benefits. The basic component drives provident fund and gratuity, so the split matters.
- Annual cost to the employer is higher than the headline salary because of contributions, gratuity, insurance and bonus.
- Variable pay is usually paid in cash and taxed in the hands of the employee as salary.
- Equalise offers across cities; the cost of living, the state taxes and the market rates vary a great deal.
The payroll compliance cycle
- Monthly: deposit Withholding Tax on salary by the 7th, provident fund and ESI by the 15th, and state professional tax where applicable.
- Quarterly: TDS returns for salary.
- Annual: employee tax statements, provident fund and ESI returns, bonus and gratuity checks, shops and establishment renewals.
- Registration: EPFO, ESIC, professional tax and shops and establishment registrations when you cross employee numbers.
The labour codes
India has consolidated twenty-nine central labour laws into four codes: wages, industrial relations, social security and occupational safety. They were reported to have come into force on 21 November 2025, with rules and state implementation still developing. Singapore HR teams should assume rules for wages, overtime, fixed-term employment and gratuity are being updated, and ask the payroll provider for a short list of changes each quarter.
Share plans for Indian employees
- Indian-resident employees can receive shares or options of a Singapore parent under the foreign investment rules for residents; reporting and permissions apply.
- On exercise, the difference between fair value and the price paid is taxed as a perquisite in the employee's salary, and the employer must withhold tax.
- A later sale of the shares is taxed as capital gains. Resident employees must report foreign assets in their Indian return.
- A recharge from the Indian subsidiary to the Singapore parent for share costs should be agreed in writing and priced under transfer pricing rules. See transfer pricing.
Employer of Record as a first step
An Employer of Record employs your people on its Indian entity and charges you a fee. It removes the registration burden for a pilot. Because the EOR, not you, is the employer, you have less control, and if your staff start concluding contracts for the Singapore company, a permanent establishment may arise. Move to a subsidiary once you reach a stable headcount.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, IRAS, ACRA and the Singapore Academy of Law (apostilles).
Frequently asked questions
What is the difference between CPF and India's provident fund?
CPF is a Singapore scheme for citizens and PRs. India's EPF is a separate scheme for covered employees in India. Singapore citizens working in India are exempt from EPF under CECA.
Do I need a written employment contract in India?
Yes. Issue a written appointment letter covering role, pay structure, notice, confidentiality and termination, and check state shops and establishment rules.
What is gratuity?
A lump sum paid on exit after a minimum period of continuous service, calculated from the last drawn basic pay and years of service.
Do Indian employees need ESI?
Employees below the wage ceiling in covered areas are covered by the ESI scheme, with contributions from employer and employee.
When did the labour codes come into force?
The four labour codes were reported to have come into force on 21 November 2025. Rules and state implementation are still developing, so confirm the current position.
Can I give Indian employees shares in the Singapore parent?
Yes, subject to the foreign investment rules for residents. They are taxed as a perquisite on exercise, and the employee reports foreign assets in the Indian return.
Is an Employer of Record a long-term solution?
Not usually. It suits a pilot. For a stable team, a subsidiary gives control, brand and a clean legal position.
Related guides
Singapore Employees Working in India: What the Tax Treaty, the EPF Exemption and CPF Mean
How income tax, India's Employees' Provident Fund and Singapore's CPF apply to Singapore staff working in India: the treaty's 183-day test, the citizen exemption, and PR and foreign-national gaps.
Read the guide →Relocating Singapore Staff to India: Visa Routes, OCI, Registration and Day-Count Controls
How to move employees from Singapore to India: e-Business and employment visas, the USD 25,000 salary floor, dependants, OCI for people of Indian origin, FRRO registration, residence tests and housing.
Read the guide →Moving Personal Data Between Singapore and India: PDPA Transfer Rules and the DPDP Act
How Singapore's PDPA and India's Digital Personal Data Protection Act apply when a Singapore company has an Indian subsidiary: transfer limitation, contracts, breach notice, consent, penalties and a build plan.
Read the guide →Compliance Calendar: Indian Dates for the Subsidiary, Beside the Singapore Parent's Dates
A calendar of Indian monthly, quarterly and annual filings for a subsidiary of a Singapore company, with the Singapore parent's ACRA and IRAS dates alongside and a note on year-end alignment.
Read the guide →Sources
Last updated 21 October 2026. General information only, not legal or tax advice. Indian and Singapore rules change often; confirm current requirements before acting.