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India market entry · Liaison office payroll and labour law

Payroll and Labour Law Compliance for Liaison Offices in India

Prepared by S U and Company's CA-led advisory team · Published 27 October 2026 · About S U and Company

Even a two- or three-person liaison office has tax deduction, state registrations, and visa rules for its team, and the liability for getting any of it wrong falls on the foreign company, not just the local staff running it day to day. Because liaison offices tend to be small, several thresholds — EPF, ESIC — may genuinely not apply, but that has to be confirmed against current headcount, not assumed because the office is a liaison office.

Quick answer

What payroll and labour law compliance does a liaison office have in India?

A liaison office has no income, so salaries are paid from head office remittances. It must still deduct tax at source with a TAN, follow the Labour Codes and the state Shops and Establishments law, check EPF and ESIC thresholds against its actual headcount, and register its expats with the FRRO.

1. Payroll funded by remittances, not revenue

A liaison office has no income, so its salaries and every other payroll cost are paid from remittances sent by the head office through banking channels, with each month's payroll run matched against the remittances actually received — the same discipline that governs the office's accounting more broadly.

2. Social security thresholds that smaller teams may not meet

EPF generally applies to establishments with 20 or more employees, and ESIC to establishments above a notified size for employees within the wage limit. A liaison office running a lean team can genuinely sit below both thresholds, but this needs checking against the current headcount and wage limits each time staff are added, not assumed permanently because the office started small.

3. Expat contributions and treaty exemptions

Foreign employees working at the liaison office are generally treated as international workers and contribute to EPF on their full salary unless a social security agreement between India and their home country, backed by a certificate of coverage, provides an exemption. Each expat's country should be checked against the current list of agreements in force rather than assumed from a colleague's nationality.

4. Professional tax and TDS

Professional tax is a state-level deduction from salaries in states such as Maharashtra, Karnataka and West Bengal, requiring registration wherever the liaison office is located. Separately, a liaison office that pays salaries must deduct tax at source, which requires a Tax Deduction Account Number (TAN), deposit of the tax deducted, quarterly TDS returns, and annual tax certificates for each employee.

5. The Labour Codes and state law

The four Labour Codes on wages, industrial relations, social security and workplace safety have been in force since 21 November 2025, with central rules notified on 8 May 2026 and state rules still following in stages. The state Shops and Establishments law also applies, covering registration, registers, and the wage structure rules now in force under the Codes.

6. Expats: visas and FRRO

An expat working in a liaison office generally needs an employment visa, which carries a minimum annual salary condition — a business visa does not permit employment, so the payroll contract has to match the visa category used. A foreign national on a visa valid for more than 180 days must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival, with extensions and exit permits also going through the FRRO.

Frequently asked questions

Who pays the salaries of a liaison office?

A liaison office has no income, so salaries and every other cost are paid from remittances sent by the head office through banking channels, with each payroll run matched to the remittances received.

Does a small liaison office have to register for EPF and ESIC?

Possibly not. EPF generally applies to establishments with 20 or more employees, and ESIC to establishments above a notified size for employees within the wage limit. Many liaison offices, which tend to run lean teams, fall below these thresholds — a position worth checking against the current headcount and wage limits rather than assuming either way.

Do expats working in a liaison office have to contribute to EPF?

Foreign employees are generally treated as international workers and contribute to EPF on their full salary, unless a social security agreement with their home country and a certificate of coverage provides an exemption.

What visa does an expat need to work in a liaison office?

An expat working in a liaison office generally needs an employment visa, which carries a minimum annual salary condition. A business visa does not permit employment, so payroll needs to match the contract used to support the visa application.

What is FRRO registration and when must an expat register?

A foreign national on a visa valid for more than 180 days must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival, with extensions and exit permits also going through the FRRO.

Does a liaison office need a TAN to pay salaries?

Yes. A liaison office that pays salaries must deduct tax at source, which requires a Tax Deduction Account Number (TAN), deposit of the tax deducted, quarterly TDS returns, and annual tax certificates for employees.

Which labour laws apply to a liaison office?

The four Labour Codes on wages, industrial relations, social security and workplace safety have been in force since 21 November 2025, alongside the state Shops and Establishments law. These apply to a liaison office in the same way they apply to any other employer in India.

How S U and Company can help

We run monthly payroll matched to remittances, check EPF, ESIC and professional tax thresholds against actual headcount, and handle FRRO registration and extensions for expats. See our liaison office registration guide and tax compliance guide, or explore the US-to-India entry guides.

Sources and further reading