India provides many opportunities for global companies looking to expand, with over 1.2 billion people, a highly skilled labor force, and a rapidly expanding middle class. India is a complex market with multiple legal and administrative systems, a government structure with central and state budgets, and rich regional diversity.

One of the major challenges to expanding and managing payroll in India is the frequent change to both central and state regulations and business procedures. Each region has its own unique challenges and languages, so payroll can be complex to navigate.

Payroll and Tax Considerations:

  • Fixed term contracts must be in writing
  • States and territories establish their own minimum wage rates. Rates can vary considerably
  • Overtime is paid at double the standard working hours
  • Employees who work for at least 1 year are entitled to severance pay equal to 15 days wages for each year worked, if they are dismissed with good reason
  • Income tax for residents is a graduated tax and ranges from 0-30%. Health and education levy also applies at a flat rate of 4%
  • A high-income surcharge is applied to income above INR 5,000,000

HR and Statutory Requirements:

  • Employees are entitled to paid annual leave of 1 day per 30 days of work if they have worked at least 180 days in a year. Up to 30 days of leave can be carried over to the next year
  • Sick leave is determined by company policy but ranges from 15-40 days
  • Female employees receive 26 paid weeks of maternity leave which can begin 8 weeks prior to childbirth
  • Pregnant employees must give notice to their employer in writing stating when they wish to take maternity leave
  • There is no statutory paternity leave for private sector workers. The law does allow for fathers in the government sector to take 15 days of leave if they have fewer than 2 surviving children
  • There are 2 tiers in the pension system. It is a voluntary contribution-based retirement plan

Holidays in India

  • January 13 – Lohri
  • January 26 – Republic Day
  • March 1 – Maha Shivaratri/Shivaratri
  • March 18 – Holi / Dolyatra
  • April 14 – Mahavir Jayanti
  • April 15 – Good Friday
  • May 3 – Ramzan Id/Eid-ul-Fitar
  • May 16 – Buddha Purnima/Vesak
  • July 10 – Bakr Id/Eid ul-Adha
  • August 8 – Muharram/Ashura
  • August 15 – Independence Day
  • August 19 – Janmashtami
  • October 2 – Mahatma Gandhi Jayanti
  • October 5 – Dussehra
  • October 9 – Milad un-Nabi/Id-e-Milad
  • October 24 – Diwali/Deepavali
  • November 8 – Guru Nanak Jayanti

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