As the world’s fifth largest economy by nominal GDP, the Indian market presents tremendous opportunities for businesses wishing to expand abroad. India is also one of the fastest growing economies in the world, having spent billions on improving the country’s infrastructure. It boasts a common legal and administrative landscape and rising personal incomes are creating a new middle class consumer market within the country. Although an attractive option, India is a complex market. Therefore, it’s advised to pick the right partner equipped with the knowledge of the legal and business landscape to help you realise a successful business strategy in India.
Employees in India receive 9 days public holidays. As a culturally diverse society, public holidays in India differ according to state, religion and custom. Considering these factors, the company may decide which holidays to allocate as paid holiday leave. However, the following three national holidays are observed in all states and union territories in India:
The normal work week in India is 40 hours per week or 8 hours per day. The usual weekly limit is 48 hours per week with a maximum limit of 54 hours per week (including overtime).
The law stipulates a minimum of 30 minutes and maximum of 1 hour rest period for regular work. Depending on the state, this must be granted after either 4 or 5 hours of continuous work.
Holiday entitlement ranges from between 12 and 24 days of paid annual leave, depending on the type of business and state in which the employee works. Annual leave entitlement can be carried over to the following year subject to a maximum limit of 90 days.
The Maternity Benefit Act (MBA) protects women’s maternity rights in the workplace. Female employees are entitled to 26 weeks of fully paid maternity leave, giving women the third longest duration of paid maternity leave in the world, behind Canada and Norway. Female employees may start their leave up to eight weeks before their scheduled due date.
Indian employment law does not provide for paternity rights.
Most states in India provide up to 12 days of sick leave to employees. There is no sick leave carry-forwards of encashment. Any unused sick leave will lapse automatically. For all sick leaves exceeding 2 or 3 days, depending on company policy, employees may be required to provide a medical certificate.
Probation periods are commonly used as part of employment contracts in India with 3 months being a typical period. The minimum probationary period is 3 months and the maximum is one year. However, if the employee’s performance is unsatisfactory, the employer can extend the probation period for an additional three months thereon.
During a probation period, the minimum notice period is 7 days and the maximum notice period is 30 days. Once the probationary period has passed, the minimum notice period becomes 30 days and the maximum notice period can reach up to 180 days. In India, severance in lieu of notice is allowed.
The application procedure for an Indian work visa differs from country to country. Applications from U.S. citizens generally take around 30 days, United Arab Emirates citizens 14 days, and Thai citizens 7 days.
For a foreign national coming to India on an employment visa, the minimum salary threshold for eligibility to apply is US$25,000 approximately (INR 1.75 million p.a.). This salary includes monetary salary, allowances and perquisites (e.g. rent-free accommodation), paid/ provided to the foreign national, which are considered for calculating the income-tax liability of the foreign national. The employment contract should quantify and indicate the perquisites. For a foreign national who comes to India on an employment visa for a period of less than a year, the minimum salary threshold is calculated on a pro-rata basis.
It is advised that expats negotiate private healthcare benefits when agreeing the terms of an employment contract in India.
Foreign nationals residing in India who are liable to pay tax, must do so on the following types of income including:
All these forms of income are taxable along with compensation such as perks like a company car along with a driver or the individual’s employer paying tax on his or her behalf.
The following rates of income tax apply to individuals employed in India as of 1 April 2015:
|Annual Salary (INR)||Percentage of Income Tax|
|Up to 250,000||No Tax|
|Between 250,000 and 500,000||5%|
|Between 500,000 and 1,000,000||20%|
INS Global is committed to making its clients expansion goals a reality, no matter where in the world you want to take your business. We offer peace of mind to clients who are thinking about taking their first steps into the Indian market, by lifting the burden of HR management and legal red tape from your shoulders to ours. After all, it’s what we do best. Based in Shanghai and with our expansion services reaching over 15 countries in Asia-Pacific, you can trust our expertise to get your business up and running in India in record time. Contact our expert advisers today to learn how our PEO solution and other expansion services can help you.
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