India's technology talent is just as diverse as its culture. With around 75% of global digital talent present in the country, the Indian subcontinent remains the top offshoring destination for technology companies worldwide. While finding great technology talent is easy, employing them in India can be slightly more complex.
From developer salaries to labor law in India, Skuad 101 guide will help present a clear picture of establishing a subsidiary office space and setting up a remote technology team.
Indian Rupee (₹) 1 INR = 0.013 USD
6.8% growth rate (2018)
Locally, India follows IST (Indian Standard Time). This means India is in the GMT+ 5:30 time zone. Further, IST is not adjusted for daylight savings; therefore, it remains the same throughout the year.
Full-time, Contract & Freelance
Technology Talent in India
India is a global hotspot for tech talent, with over 7000 startups employing talent in India. Tech giants like Microsoft, IBM, and Google attract talent from top universities such as the Indian Institute of Technology (IIT), National Institute of Technology (NIT), Delhi Technological University (DTU), Birla Institute of Technology & Science (BITS), etc. The top technology roles in India include Android Developers, Full Stack Developers, Data Scientists & Machine Learning Developers and talent for this is majorly found and deployed in Delhi, Mumbai, Bangalore, Pune, Hyderabad, and Chennai. There has been a continuous rise in tech jobs, and in 2019, Bangalore contributed $45 Billion of IT exports, making it one of the largest IT hubs in the world.
If you are a technology professional looking to be hired, connect with Skuad.
The minimum median hourly wage for a full-time & contract technology professional in India is ₹300-700 ($ 4-8) and for a freelancer is ₹700-1000 ($ 10-14). These hourly rates can fluctuate depending on the experience and technology profile.
India has a standard working hour of 45 hours per week for a full-time employee. Since a freelancer is not committed to an organization, no such clause applies to them.
There are no payments made to full-time & contract technology employees for each hour exceeding the defined working hours.
Paid Time Off
Indian employment law mandates a minimum of 15 paid leaves annually to full-time employees. The leave policy for employees in India consists of 20-30 paid leaves each year that includes public holidays, sick leaves & casual leaves. In the case of contract workers and freelancers, leaves follow the contract between the two parties.
Human resource laws mandate paid time off of 26 weeks for full-time female employees with fewer than two children in India. If the employee has more than two children, she is entitled to 12 weeks' leave. Adopting or commissioning mothers are entitled to 12 weeks' leave. Female contract workers in India are eligible for maternity leave. However, the duration depends on the nature of the contract between the two parties.
Pregnancy Disability Leave
Female full-time employees who have unfortunately suffered from pregnancy-related mishappenings are entitled to 2-6 weeks of special leaves. There is no such official law for contract and freelance workers.
As per India’s employment laws, there is no provision for paternity leave in India. However, some employers voluntarily grant one week of paternity leave to full-time employees.
Some employers in India do provide unpaid sabbatical leave, but that is purely based on the employment agreement and terms & conditions agreed upon by both parties.
Usually, organizations have a probationary period of 3 to 6 months for all full-time or contract employees in India. If specific terms of service change, the employees are notified.
India Payroll for full-time/contract employees is run once every month and is paid anywhere between the last two days of the month and the first week of the following month. For freelancers, payments are either processed on a half-and-half basis or post-completion of the project.
Employers are required to provide monthly payslips to each employee for each payment & deductions. In the case of freelancers, they generate invoices monthly, for which payments are made.
In India, the legal status is different for full-time, contract & freelance employees. For full-time, employee tax in India is charged under 'Income from Salaries'. Hence, net taxable income after standard deduction is subjected to a progressive tax bracket of 5% to 30% on income above ₹2,50,000. Remunerations are disclosed under 'Income from Business or Profession' for contractors & freelancers with a flat deduction of 10%.
NOTE: Tax year in India for most businesses runs from 1st April to 31st March the following year.
Income Tax Returns (ITR)
Along with deducting taxes for each employee, an employer needs to facilitate the process of ITR. The employers should provide each full-time employee with a Form 16, and each contract employee should be provided a Form 16A to file ITR. This form contains a summary of the employer’s taxes deducted and deposited against the Permanent Account Number (PAN) with the government. It also includes an overview of the total amount paid by the employer to the employee for that financial year.
For more information, refer to the source: Clear Tax, Chartered Club.
The generally accepted retirement age is 60 years. Though private employees in India are known to work for longer, the retirement age can be extended or shortened as per a company’s discretion.
Employee Provident Fund (EPF)
Companies are expected to register themselves with the EPF Organization within one month of attaining a strength of 20 or more full-time and contract employees. Employment rules in India make it mandatory for employers to contribute 12% of an employee’s salary. No employer is liable to contribute towards a freelancer’s EPF.
Every employer is entitled to pay gratuity to a full-time employee who has continuously rendered their service for at least five years. It serves as social security to employees after retirement and entitles them to a tax-free gratuity of up to ₹20 lakhs. Fixed-term contracts are entitled to gratuity if dictated by their agreement. Freelancers are not.
Bouquet of Benefits
Although not mandatory, employee benefits for full-time and contract employees in Indian tech companies are as follows:
Health Insurance & Life Insurance
Most technology companies in India offer health insurance or life insurance, or both to their full-time employees. The nature of coverage and amount would depend on the employer’s policies and the contract’s nature between both the employee and the employer.
Some employers contribute to employee welfare in India. Activities in this area may include providing housing facilities, provision of loans, in-office counselors for mental well-being, group yoga/Zumba classes, etc.
Employers in India ensure that they incentivize every employee with a bonus for going the proverbial extra mile. The reward should be paid at a minimum rate of 8.33%, and the parameter differs from one employer to another.
Remote Working Allowance
The rights of private-sector employees in India do not instruct a remote working allowance as the concept is relatively new. However, most private firms have started providing logistical compensation equivalent to rent, wifi, electricity, office furniture, stationery, etc., costs would have been a part of operational expenses.
Employee termination policy in India dictates a 30-90 days notice period to both employee & employer. The notice period can be waived off by either paying compensation instead of compromising on the salaries & benefits as applicable.
At termination, an employer must provide an employee with:
- A copy of the approved service letter
- Forms and returns that include Provident Fund, salary certificates & any other legal document applicable otherwise
The most commonly obtained license is the Company or LLP Registration. A business with an annual turnover of over 20 Lakhs is required to register as an LLP or a company regulated by the Ministry of Corporate Affairs. Entrepreneurs can enjoy limited liability as a business acquires a separate entity.
Companies with a net worth of at least $50,000 can set up a Liaison office to conduct market surveys and feasibility studies. A liaison office acts as a communication channel between a head office and the Indian entity but does not indulge in any commercial activity. Initially, these offices can be set up for three years and only receive funding from their parent company. A Form FNC needs to be submitted to an Authorised Dealer Category-I bank along with statutory documents to open a liaison office.
A company with a net worth of at least $100,000 can set up a branch office to conduct full-fledged business (except manufacturing). The Parent company also needs to show that it has made a profit in the last five years in the home country. A Form FNC duly signed by AR along with statutory documents is required to open a branch office. It is considered a foreign company and taxed at 40%.
Joint Venture & Wholly Owned Subsidiaries (FDI)
A foreign company can set up its business in India by agreeing with two or more parties to share resources, risks, and ownership (joint ventures) or control ownership in a company through 100% FDI (wholly owned subsidiary). FDI is not permitted for businesses like real estate, lottery, gambling, and atomic energy. The foreign company can do FDI via the automatic or government route where prior government approval is required.
Co-working spaces in the IT hubs of India like Bengaluru, Gurgaon & Mumbai start from around $100. Cities like Chandigarh, Ahmedabad, Chennai, etc., are some affordable alternatives.
Business Taxes in India
Value Added Tax (VAT)
VAT is a state-level tax applicable for items not taxable under GST Act, such as petrol, diesel, and alcohol. The standard rate is from 1% to 15% and varies depending on the type of goods sold. Companies with an annual turnover exceeding ₹5 lakhs must register for VAT. A VAT number consisting of 11 digits is allotted to a trader to file VAT payments. Return filing dates are the 10th, 15th, and 20th of the succeeding month for the preceding month.
Goods and Services Tax (GST)
GST rates range from 5% to 28%, depending on products & services. As per the GST law in India, all entrepreneurs must obtain GST registration within 30 days of starting a business. A 15 digit GISTIN is allotted to every registered person/ business liable to deduct TDS or collect TCS. Returns are to be filed monthly on the 20th of the following month.
Corporate Income Tax (CIT)
Domestic companies are taxed on universal income, and foreign companies are taxed on the following income rates within India:
The ITR is supposed to be filed by 30th September, every year. Forms mandated by the Indian government to file the same include ITR 6 (all except companies claiming deduction under Section 11) and ITR 7 (all except companies registered under Section 8 of companies act, 2013).
Employment Visas for India
An Indian business visa with multiple entries can be granted for up to 5 years, as per the requirement. A Visa is mandatory for foreign nationals to explore and set up business ventures in India, partnering in an Indian business, recruiting people from India, and so on.
For more information, refer to the source: Ministry of Home Affairs.
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