India is the world’s largest independent-contractor talent pool, and engaging Indian contractors from abroad is routine — but the compliance that matters sits mostly on the contractor’s side (GST export status, FIRC/FIRA documentation) plus two things the hirer must get right: IP assignment and misclassification.
The contractor setup
Most Indian contractors invoice as a sole proprietor under their PAN (no separate entity); larger ones use a Pvt Ltd or LLP. Income is business/professional; many professionals elect the Section 44ADA presumptive scheme — 50% of gross receipts deemed profit, no books or audit, up to ₹50 lakh (or ₹75 lakh if cash receipts are ≤5%). GST registration is mandatory above ₹20 lakh, but export of services is zero-rated when paid in convertible foreign currency, and contractors file a Letter of Undertaking (LUT) to export without paying IGST (cleartax.in; karboncard.com, checked 2026-07-16).
Classification has no single statutory test — courts and the EPFO/ESIC apply a control / integration / economic-dependence analysis, substance over the contract. The consolidated Labour Codes (reported effective late 2025) broaden the “employee” definition and extend social security toward gig work, so a directed, fixed-hours, single-client “consultant” is readily reclassified.
What to put in the contract
- A written services agreement scoped to deliverables, contractor’s own tools/hours, ideally multiple clients.
- IP assignment in writing. Under the Copyright Act 1957, the author is first owner (Sec. 17); the commissioner-owns exception is exhaustive and excludes software — so code stays with the contractor unless assigned in writing (Sec. 19). Include an explicit assignment clause.
Taxes and paperwork
The contractor’s side. PAN + (above ₹20 lakh) GST with an LUT; income tax under 44ADA or normal slabs; advance tax if liability > ₹10,000.
The client’s side. Pay gross in convertible foreign currency through a rail that produces a FIRA/FIRC, tagged with the right RBI purpose code (e.g. P0802 software consultancy). US payers collect a W-8BEN (W-8BEN-E for an entity) and file no 1099; the US–India treaty is claimed on the W-8BEN for any US-source income.
How to pay contractors in India
| Method | What the contractor sees | Notes |
|---|---|---|
| SWIFT wire | USD/INR to a bank account | Generates the FIRA/FIRC export trail; the compliant default |
| Wise | Near-mid-market FX to INR | Widely used; provides remittance documentation |
| Payoneer | USD/EUR/GBP receiving accounts | Popular; cheaper FX than bank wires |
| UPI | — | Domestic-only; cannot receive inbound foreign remittances |
Platforms that cover Indian contractors
India is a first-tier market that every major platform in our rating supports. Broad global options (Deel, Remote, Payoneer, Wise) all cover it; confirm COR/EOR specifics on the provider’s own site. Full field: contractor management rating and contractor payouts rating.
Contractor of Record in India
A Contractor of Record engages the Indian contractor, handles compliant documentation and carries misclassification liability — useful given retroactive PF/ESI exposure on long consultant relationships. For roles that are really employment, use an EOR. Compare providers in our COR rating.