US Company Sending Employees to India: Secondment, Payroll, Tax and PE

Prepared by AU Corporate's CA-led advisory team · Published 14 October 2026 · General information; assess each assignment before travel or payroll setup.

A US company may send a manager, engineer, project lead or specialist to India for a temporary assignment or to support its Indian subsidiary. The arrangement can look simple from an HR perspective, but it may raise separate questions about immigration, salary taxation, payroll withholding, social security, intercompany cost recharges and the US company’s tax presence in India. Resolve these questions before the employee starts working in India.

Quick answer

What should a US company check before seconding an employee to India?

Confirm the correct immigration permission, Indian salary-tax treatment and treaty position, payroll and withholding obligations, who directs and bears the cost of the employee’s work, any social-security requirements, transfer-pricing and GST treatment of recharges, and possible permanent-establishment exposure. The signed assignment letter is only one part of the evidence; actual working arrangements matter.

1. Define the assignment before the employee travels

Write down the commercial purpose, duration, work location, reporting line, authority, deliverables, remuneration, benefits, and the entity that bears the employee’s cost. Clarify whether the employee remains employed by the US parent, becomes employed by the Indian subsidiary, or works under a split or secondment arrangement. Also establish who can direct day-to-day work and who is responsible for employment-related decisions.

These details help the company assess the correct visa route, tax treatment and payroll process. Do not rely on the title “business visitor,” “consultant” or “secondment” without checking what the individual will actually do in India.

2. Immigration and work authorisation

Before booking travel, identify the activity the employee will perform and confirm the appropriate visa or work authorisation with qualified immigration advisers or the relevant Indian mission. Meetings, negotiations, installation, training, project delivery and day-to-day operational work may not be treated identically. Visa conditions can restrict activities, and a tax analysis does not itself authorise someone to work in India.

3. Indian salary tax and treaty review

Salary relating to employment exercised in India may be taxable in India under domestic law, subject to any applicable treaty relief and the facts. The employee’s residence status, assignment days, where duties are performed, who pays or bears the remuneration and the conditions of the India–US tax treaty can all matter. A short assignment does not, by itself, establish that the salary is exempt from Indian tax.

Keep a travel-day calendar, assignment letter, payroll records, compensation breakdown, benefit records and evidence of the work performed. Review tax withholding and return-filing responsibilities early, including how any tax paid in one country may be considered in the other country. The India–US tax treaty text published by the Income Tax Department should be read alongside current domestic law and the assignment facts.

4. Payroll, employer obligations and social security

Decide how salary, bonus, equity compensation, benefits and tax withholding will be administered while the employee is in India. Depending on the facts, the US payroll may continue, an Indian payroll arrangement may be required or appropriate, or the Indian subsidiary may take on local employment responsibilities. Do not choose a payroll approach before reviewing the employer, withholding and reporting position.

Check social-security treatment separately. India’s international social-security agreements, coverage rules and any certificate-of-coverage or exemption process may affect the result. Confirm the person’s nationality, home-country coverage, assignment duration and the applicable agreement rather than assuming that temporary assignment automatically removes all obligations.

5. Salary recharge to the Indian subsidiary

Where the Indian subsidiary benefits from the employee’s work, the group may consider a recharge of salary and related costs. The documentation should explain the functions performed, the beneficiary, the cost base, any markup rationale, and the settlement method. The accounting entry alone does not determine whether the arrangement is a pure reimbursement or a service for tax and GST purposes.

Review transfer pricing, GST place-of-supply and classification, withholding tax and foreign-exchange documentation as applicable. Keep the assignment agreement, time allocation, cost calculations, intercompany invoice or debit note, evidence of benefit and approval records aligned. For related issues, see our guides to intercompany expense reimbursements and management fees and transfer pricing.

6. Assess permanent-establishment exposure

An employee’s presence in India can create tax risk for the US parent in some circumstances. Review whether the employee has authority to conclude contracts, habitually plays a principal role leading to contracts, performs core business activity in India, or works from a fixed place that may be at the parent’s disposal. The relevant treaty language and the actual operating model must be examined; no single factor resolves every case.

Document who negotiates and approves contracts, where decisions are made, which entity serves the customer, and whether the employee acts for the US parent or the Indian subsidiary. See our separate guide to permanent-establishment risk for US companies in India. A written secondment agreement is helpful, but it cannot override the substance of the working arrangement.

7. Practical pre-assignment checklist

Confirm assignment purpose, length, duties, work location and reporting line.
Check visa category and permitted activities before travel.
Review Indian tax residence, salary source, treaty conditions and withholding.
Determine the payroll, benefit reporting and social-security approach.
Document who directs the employee and which entity benefits from the work.
Assess any salary recharge for transfer pricing, GST and withholding.
Evaluate permanent-establishment exposure and contract authority.
Keep day-count, travel, assignment, payroll, cost and approval records.
Set a review date if the assignment is extended or duties change.

Frequently asked questions

Can a US company send employees to work in India temporarily?

Potentially, but the company should review the person’s immigration and work-authorisation position, Indian tax residence and salary taxation, payroll obligations, employment arrangements and any permanent-establishment exposure before the assignment begins.

Does a seconded employee have to pay income tax in India?

Salary for employment exercised in India may be taxable in India, subject to the applicable domestic law, treaty provisions and facts. Short stays do not automatically make the income tax-free; the treaty’s employment-income conditions and employer details need to be assessed.

Does a US company need to run Indian payroll for a seconded employee?

The answer depends on the employment and economic-employer facts, who bears the salary cost, assignment duration and applicable tax and payroll rules. Review withholding, payroll reporting and social-security obligations before deciding how to operate payroll.

Can salary costs be recharged to the Indian subsidiary?

A recharge should reflect the real arrangement and be documented. Review who directs and benefits from the employee’s work, whether the payment is a cost allocation or a service, and the applicable transfer-pricing, GST and withholding-tax treatment.

Can seconded employees create a permanent establishment for the US company?

Potentially, depending on the work performed, authority exercised, duration, business activities and applicable tax treaty. A secondment agreement alone does not determine the result; the actual conduct and functions matter.

Does a business visitor visa allow an employee to work in India?

Do not assume that a business visa permits productive employment or every planned activity. Confirm the correct visa category and work-authorisation requirements with qualified immigration support before travel.

This guide is general information, not immigration, tax, employment or legal advice. Requirements depend on the individual, the work performed, the contractual and economic arrangements, and the law in force during the assignment.