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Hire & Pay Contractors in India: A Complete Guide

Written by
Aditya Nagpal
9
min read
Published on
January 16, 2026
Contractor Payments & Management
Use AI to summarize this article
TL;DR
  • You can hire Indian contractors without setting up an entity - just execute a contractor agreement and handle payments directly
  • Expect to save 40-60% on labor costs compared to hiring locally in the US/Europe, with rates ranging from $10-80/hour depending on role and experience
  • Misclassification is the biggest risk - Indian authorities use the "control test" to verify if someone is truly a contractor or actually an employee in disguise
  • Essential documents needed: PAN card, independent contractor agreement, Form W-8BEN (for US companies), and invoices with GST if applicable
  • Payment options: Wisemonk ($19/month + 1% FX for compliance), Wise (0.5-2% for DIY payments), or traditional wire transfers (3-5% total costs with hidden fees)

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You want to tap into India's skilled talent pool, but the compliance questions are piling up. Misclassification risks, confusing tax forms, hidden payment fees, and conflicting advice on what's actually required.

Here's the reality: hiring contractors in India is straightforward when you know the rules. The cost savings are real (40-60% compared to local hiring), and you don't need an Indian entity to get started.

But get the classification wrong or miss critical tax documents, and you're looking at penalties, back taxes, and compliance headaches.

This guide covers everything, from India's "control test" for contractor classification to choosing payment methods that don't drain your budget in fees. No legal jargon. Just the practical steps to hire, onboard, and pay Indian contractors compliantly.

Why hire contractors in India?[toc=Why Hire Contractors]

India has become one of the top destinations for companies looking to hire contractors globally. The reasons are straightforward: access to highly skilled workers at competitive rates, paired with a massive English-speaking talent pool.

The talent advantage

When you hire contractors in India, you're tapping into a workforce of over 5 million tech professionals alone, not to mention skilled workers across design, marketing, finance, and other fields. Indian contractors often bring specialized skills developed through work with global companies, making them immediately productive for your projects.

The English proficiency here matters more than you might think. Communication with Indian contractors is typically smooth, which means fewer misunderstandings and faster project completion compared to contractors from other cost-effective markets.

Real cost savings

Here's where hiring independent contractors in India really pays off. Companies typically save 40-60% compared to hiring locally in the US or Western Europe for equivalent roles.

Let's break down what this looks like:

  • A senior software developer in the US might cost $80-120 per hour. An equally skilled Indian contractor charges $25-45 per hour.
  • Marketing specialists that command $60-90/hour in Western markets are available for $15-35/hour in India.
  • Design professionals billing at $70-100/hour locally can be hired for $20-40/hour.

These aren't just cheaper alternatives. You're often getting contractors with experience working for global companies, who understand international business practices and can integrate smoothly into your global team.

Beyond the hourly rate

The savings extend beyond the contractor payments themselves. Since independent contractors in India handle their own income taxes, benefits administration, and compliance with local labor laws, you avoid the overhead costs that come with full time employees. No health insurance, no employees provident fund contributions, no paid national holidays.

You're also working with a time zone that can be advantageous. Indian contractors can provide work overnight for US-based companies, essentially giving you round-the-clock productivity if structured right.

Hiring contractors in India lets you access world-class talent while keeping your costs manageable, which is why so many companies start hiring independent contractors there as they scale their global workforce management strategy.

Contractor or Employee: what's the right choice in India?[toc=Contractor vs. Employee]

This isn't just a cost question. It's a legal one that can seriously backfire if you get it wrong.

The core legal difference

Here's what separates an independent contractor from an employee under Indian labor laws. The distinction matters because employees are protected by the Industrial Disputes Act and other employment laws. Contractors aren't.

Independent Contractor vs. Employee: Key Differences
Factor Independent Contractor Employee
Work relationship Project by project basis Ongoing, indefinite
Control Manages own process and schedule You dictate how and when work gets done
Tools & equipment Uses their own resources You provide tools and workspace
Multiple clients Can work for several companies Typically exclusive to your company
Payment structure Invoices for services rendered Regular salary with tax withholding
Benefits None - handles own taxes and insurance Health insurance, provident fund, paid leave
Legal protection Covered by Indian Contract Act Protected by Industrial Disputes Act and employment laws
Termination Contract ends at project completion Requires notice period and severance

When contractors make sense

Use independent contractors in India for:

  • Specific projects with clear deliverables and timelines
  • Specialized skills you need temporarily
  • Work that doesn't require daily oversight
  • Tasks outside your core business operations
  • Seasonal or fluctuating workload

Think website redesign, marketing campaigns, financial audits, or software development projects where you define the outcome but not the day-to-day process.

When employees make sense? Read out complete article on Hire & Pay Employees in India.

The misclassification trap

Here's where companies get into trouble: calling someone a contractor when they're actually functioning as an employee. Indian authorities look at the actual working relationship, not just what your contract says.

If you're setting their work hours, providing equipment, requiring exclusivity, and treating them like staff, you're creating an employer employee relationship regardless of what the paperwork claims. Misclassifying workers can trigger back taxes, penalties, and employee benefit claims.

To understand better you can read our complete article on Independent Contractor vs Employee.

How does India classify contractors?[toc=India Classify Contractors]

Indian law doesn't care what you call someone. It cares about the actual working relationship. Courts and tax authorities use specific tests to determine if someone is truly an independent contractor or actually an employee in disguise.

The control test

This is the big one. Indian courts primarily rely on the "control test" to classify workers under the Indian Contract Act and employment laws.

Here's what they examine:

Who controls the work? If you're directing how the work gets done, when it gets done, and supervising the process, that points toward an employee relationship. If the contractor decides their own methods and schedule to deliver agreed results, that's genuinely independent.

Who owns the tools? Employees use company-provided equipment and resources. Contractors use their own tools and bear their own business expenses.

Integration into business Is the person embedded in your company culture, attending team meetings, and functioning as staff? That suggests employment. Contractors remain independent, interfacing only as needed for project completion.

What else Indian law considers

Beyond the control test, authorities look at:

  • Payment method: Contractors invoice for services. Employees receive regular salary with tax deducted at source.
  • Exclusivity: Can they work for other clients? Contractors typically serve multiple companies. Employees usually work exclusively for you.
  • Duration: Short-term, project-based work suggests contractor status. Ongoing, indefinite relationships look like employment.
  • Benefits: Providing health insurance, provident fund, or paid leave indicates an employment contract, not a contractor agreement.
  • Termination rights: Can you fire them at will? That's an employee. Contractors have agreements that end at project completion.

Why this matters

Get the classification wrong, and you're facing serious consequences. The Indian government can reclassify your contractors as employees, triggering:

  • Back payment of employees provident fund contributions
  • Unpaid income taxes and penalties
  • Employee benefits claims
  • Protection under the Industrial Disputes Act
  • Potential legal action for misclassifying workers

The control test isn't just legal theory. It's how Indian authorities decide whether your independent contractor agreement actually reflects reality or if you've created an employer employee relationship by another name.

Where do global companies find Indian contractors?[toc=Find Indian Contractors]

Finding skilled contractors in India isn't hard. The challenge is finding the right ones efficiently. Global companies typically use three main channels, each with distinct tradeoffs.

1. Freelance platforms

Sites like Upwork, Toptal, Fiverr, and local platforms like Naukri or Freelancer.in are where most companies start hiring independent contractors.

Pros:

  • Instant access to thousands of Indian contractors across all skill sets
  • Built-in payment processing and international payments handling
  • Profile reviews and past work samples
  • Can post a job description and get proposals within hours
  • Platform handles basic compliance and payment method logistics

Cons:

  • Fee structure typically adds 10-20% to contractor payments
  • Quality varies wildly - you'll sift through many unqualified candidates
  • Limited vetting beyond what's on the profile
  • Contractors may juggle multiple projects, affecting availability
  • Exchange rate markups and percent based transfer fees add hidden costs

2. Referrals and networks

Getting introductions through your existing global team, business contacts, or other contractors you've worked with.

Pros:

  • Pre-vetted by someone you trust
  • Higher quality candidates on average
  • Often better cultural fit since they come through your network
  • No platform fees eating into your budget
  • Faster hiring process with warm introductions

Cons:

  • Limited pool - you're restricted to who your network knows
  • May take longer to find specialized skills
  • No formal structure for payments or contracts
  • You handle all compliance, tax documents, and legal requirements yourself
  • Harder to scale when you need multiple contractors quickly

3. Recruitment agencies and EOR services

Specialized agencies that source Indian contractors or Employer of Record (EOR) services that manage the entire relationship.

Pros:

  • They handle sourcing, vetting, and presenting only qualified candidates
  • Manage all compliance, tax withholding, and legal requirements
  • Deal with international payroll complexity and exchange rates
  • Reduce risk of misclassifying workers
  • Save time on benefits administration and contractor payments
  • Handle local labor laws and tax professional requirements

Cons:

  • Higher upfront costs than direct hiring
  • Less direct control over the hiring process
  • May have minimum contract terms
  • Some agencies focus on volume over quality matching

From our experience working with global companies hiring and managing contractors, recruitment agencies and EOR providers in India are often the safest option when minimizing compliance risk is a priority.

Which channel makes sense?

For one-off projects or testing the waters? Start with freelance platforms. You'll learn what Indian contractors can deliver without major commitment.

Building a global workforce management strategy with regular contractor needs? Invest in developing referral networks while using platforms to fill gaps.

Scaling fast or dealing with complex compliance? Agencies and EOR services like Wisemonk pay for themselves by handling the tax treatment, legal requirements, and payment logistics that bog down internal teams.

Most companies end up using a mix. Platforms for quick hires, referrals for trusted specialized skills, and EOR services when compliance risk or scale demands professional management.

How do you evaluate and onboard Indian contractors?[toc=Evaluate & Onboard Contractors]

Vetting contractors properly upfront saves you from project disasters and compliance headaches down the line. The process looks different than hiring employees because you're evaluating deliverables, not cultural fit.

1) Vetting before engagement

Review their portfolio and past work

Don't just look at what they claim to do. Ask for specific examples relevant to your project. A developer should show code samples. A designer should present case studies. A marketing contractor should demonstrate campaign results.

Check references. Contact 2-3 previous clients and ask pointed questions: Did they meet deadlines? How did they handle revisions? Would you hire them again?

Test their skills

For most roles, a paid test project tells you everything. Give them a small, real task similar to what you'll need. Pay them fairly for it. You'll see their work quality, communication style, and turnaround time before committing to the full project.

This also helps you gauge if they understand your requirements without constant hand-holding.

Verify credentials and legal status

Request their PAN (Permanent Account Number) card - this is essential for tax documents and contractor payments in India. Confirm they're registered as a self employed individual or business entity if they claim to be.

For specialized skills, check relevant certifications. A CA (Chartered Accountant) should have proper credentials. Tech contractors might have certifications from AWS, Google, or similar.

Assess communication and availability

Time zone overlap matters. Clarify their working hours and response expectations. If you're a US-based company, will they be available for calls during your morning?

Test their English communication skills during initial conversations. You need someone who can understand requirements and articulate blockers without constant back-and-forth.

2) Contractor onboarding (not employee onboarding)

This is lighter than employee onboarding. You're not integrating them into company culture or setting up benefits administration.

Documentation

Collect and finalize:

  • Independent contractor agreement signed and executed
  • PAN card copy for tax withholding purposes
  • Form W-8BEN if you're paying from outside India (more on this later)
  • Bank details for international payments
  • GST registration number if applicable

Project briefing

Give them everything they need to start:

  • Clear job description and scope of work
  • Deliverables and deadlines
  • Communication channels (email, Slack, project management tools)
  • Access to necessary files, tools, or platforms
  • Payment structure and invoice requirements

Set expectations

Clarify upfront:

  • How you'll measure project completion
  • Revision process and limits
  • Intellectual property rights ownership
  • Confidentiality requirements
  • Invoice submission deadlines
  • Payment method and schedule

Keep it simple

Unlike employees, contractors don't need:

  • Company email addresses
  • Extensive training on internal systems
  • Introduction to the full team
  • Information about company policies or national holidays

They need what's relevant to deliver their specific project. Overcomplicating contractor onboarding creates confusion about the working relationship and can actually increase your risk of misclassifying workers.

Get the written agreement right, confirm they have what they need to execute, and let them work.

Do you need an Indian entity to hire contractors?[toc=No Indian Entity]

No, you don't need to set up an Indian entity just to hire contractors. Foreign companies can engage independent contractors in India directly. That's one of the major advantages of contractor hiring over employing full time employees.

Why contractors are different

When you hire contractors, you're buying services, not creating an employment relationship. This means you can pay independent contractors in India as a foreign company without registering a legal entity there.

You simply execute an independent contractor agreement, handle the payments, and they invoice you for work completed. The contractor is responsible for their own income taxes and compliance with Indian law.

When tax complications arise

Here's where it gets tricky. Just because you can hire contractors without an entity doesn't mean you're free from all tax obligations.

Tax withholding (TDS)

If you have a Permanent Establishment (PE) in India or any taxable presence, you might be required to deduct TDS (Tax Deducted at Source) on contractor payments. Most foreign companies without a PE don't have this obligation, but you should verify with a tax professional familiar with Indian tax laws.

The contractor typically handles their own income tax returns as a self employed individual.

Services tax and GST

If your contractor is registered for GST and billing you for services, they'll add 18% services tax to their invoice. This is standard practice for established contractors in India. You pay it, they remit it to the Indian government.

When PE risk becomes real

A Permanent Establishment means you have a taxable presence in India. Hiring contractors alone doesn't create PE risk. But certain situations can trigger it:

What creates PE risk:

  • Your contractors work from a fixed office space you're renting or controlling in India
  • You have supervisory personnel stationed in India managing contractors
  • The contractor has authority to sign contracts on your behalf with Indian clients
  • You're essentially running operations in India through contractors

What doesn't create PE risk:

  • Hiring independent contractors who work remotely from their own locations
  • Project-based work where contractors use their own resources
  • Contractors serving you as one of multiple clients
  • No physical presence or fixed place of business in India

The safe approach

For most global companies hiring a few international contractors for specific projects, PE risk is minimal. You're buying services, not establishing operations.

But if you're scaling significantly in India, building a team of contractors who effectively function as your Indian operations, or maintaining any physical presence, talk to a tax professional. The line between legitimate contractor hiring and creating a taxable presence can blur.

When in doubt, get tax advice specific to your situation. The cost of professional guidance is far less than the penalties for inadvertently creating a PE without proper tax compliance.

What contracts and documents are required?[toc=Contracts & Documents]

Get the paperwork right from day one. A solid independent contractor agreement protects both parties and proves the working relationship is legitimate if Indian authorities ever question it.

What must be in your contractor agreement

An enforceable independent contractor agreement under the Indian Contract Act needs these core elements:

1. Scope of work and deliverables

Be specific. Vague descriptions create disputes. Define exactly what the contractor will deliver, quality standards, and acceptance criteria. If it's a website, specify pages, functionality, and design requirements. If it's content, specify word count, format, and revision rounds.

2. Payment terms

State the payment structure clearly - hourly rate, project fee, or milestone-based. Include:

  • Total contract value or rate
  • Payment schedule (upon completion, monthly, per milestone)
  • Currency (USD or Indian rupees)
  • Invoice requirements and submission deadlines
  • Payment method (bank transfer, PayPal, etc.)

3. Timeline and deadlines

Project start date, key milestones, and final project completion date. Include what happens if deadlines are missed by either party.

4. Independent contractor status

Explicitly state this is not an employment contract. The contractor:

  • Works independently without supervision
  • Uses their own tools and resources
  • Can serve other clients
  • Handles their own income taxes
  • Is not entitled to employee benefits

This language protects you from misclassifying workers claims.

5. Intellectual property rights

Critical. Specify that all work product belongs to your company upon payment. Without this clause, contractors may retain ownership under Indian law.

6. Confidentiality and non-disclosure

If they'll access sensitive business information, include confidentiality obligations that survive contract termination.

7. Termination clauses

How either party can end the agreement, notice requirements, and what happens to work in progress and payments.

8. Governing law and dispute resolution

Which country's laws apply and how disputes get resolved (arbitration vs. courts).

9. Documents to collect before payment

Don't make your first contractor payment without these:

10. PAN card copy

The Permanent Account Number is mandatory. You need this for any tax withholding obligations and record-keeping. No PAN, no payment.

11. Form W-8BEN (for US companies)

If you're paying from the United States, this IRS form certifies the contractor is a foreign person not subject to US tax withholding. Get this signed before the first payment.

12. Invoice

A proper invoice with:

  • Contractor's name and address
  • PAN number
  • Invoice number and date
  • Description of services
  • Amount (with GST if applicable)
  • Bank details for transfer

13. GST registration certificate (if applicable)

If they're GST-registered and charging you services tax, get a copy of their GST certificate.

14. Bank account details

For international payments, verify:

  • Bank name and branch
  • Account holder name (matching the contract)
  • SWIFT/IFSC code
  • Account number

15. Signed contract

Obvious but critical. Both parties must sign the written agreement before work begins.

Keep everything organized

Store all tax documents, signed contracts, and invoices. If Indian authorities or your own tax professional ever questions the contractor relationship, you'll need this paper trail to prove compliance with legal requirements.

Missing documentation isn't just sloppy. It can void your contractor agreement or create tax complications when you're making international payments.

How do taxes work for Indian contractors?[toc=How Indian Taxes Work]

Tax responsibility sits squarely with the contractor, not you. That's the whole point of hiring independent contractors instead of employees. But there are situations where you might have withholding obligations, so let's break this down clearly.

Who pays what

The contractor's responsibility:

Indian contractors are self employed individuals who must:

  • File their own income tax returns annually
  • Pay income taxes on earnings from all clients
  • Make quarterly advance tax payments if their liability exceeds certain thresholds
  • Handle their own tax compliance with the Indian government

You're not withholding payroll taxes, remitting provident fund contributions, or managing any benefits administration like you would for employees.

Your responsibility:

In most cases, if you're a foreign company with no Permanent Establishment in India, you have zero tax withholding obligations. The contractor invoices you, you pay the full amount, they handle their taxes.

When TDS applies to foreign companies

TDS (Tax Deducted at Source) is India's withholding tax system. Here's when it matters:

You must deduct TDS if:

  • You have a PE or taxable presence in India
  • You're paying through an Indian entity or subsidiary
  • You have a registered office or operations in India

The TDS rate for contractor payments is typically 10% for residents, deducted from each payment.

You don't deduct TDS if:

  • You're a foreign company with no Indian presence
  • You're making international payments from outside India
  • The contractor is billing you as a foreign client

Most US employers and international companies hiring remote Indian contractors fall into this second category. No TDS obligation.

However, verify your specific situation with a tax professional. If you're scaling operations or have any Indian presence, the rules change.

GST on contractor services

GST (Goods and Services Tax) works differently. This isn't about withholding, it's about services tax the contractor charges you.

When GST applies:

If your contractor's annual turnover exceeds ₹20 lakhs (about $24,000), they must register for GST. Once registered, they'll charge you 18% services tax on top of their fees.

So if a contractor bills $1,000 for a project and they're GST-registered, your invoice shows:

  • Service fee: $1,000
  • GST (18%): $180
  • Total: $1,180

You pay the full amount. They remit the GST to Indian tax authorities.

When GST doesn't apply:

  • Contractor's turnover is below the registration threshold
  • They're providing services that fall under GST exemptions
  • You're both located outside India (though this rarely applies to Indian contractors)

What you need from contractors

For proper tax treatment and your records:

  • PAN card copy for all contractor payments
  • GST certificate if they're charging services tax
  • Invoices clearly showing GST separately (if applicable)
  • Form 15CA/15CB if you need them (covered in the next section)

Hiring contractors in India keeps taxes simple for foreign companies. The contractor manages their income taxes. You only worry about TDS if you have Indian presence, and you pay GST only when contractors add it to invoices.

Just make sure your independent contractor agreement clearly states tax responsibility rests with them, and keep all tax documents organized for your records.

What tax forms are needed for international payments?[toc=Tax Forms Needed]

When you're making international payments to Indian contractors, certain tax forms come into play depending on where you're paying from and the amount involved. Let's clarify which ones matter and when.

1. Form W-8BEN: For US companies

If you're a US-based company paying Indian contractors, you need Form W-8BEN before making the first payment.

What it is:

Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) is an IRS form that certifies your contractor is not a US person and shouldn't have US taxes withheld from their payments.

Why you need it:

Without this form, the IRS might require you to withhold 30% of contractor payments for US taxes, even though the contractor is in India and has no US tax obligation. The W-8BEN prevents this.

When to get it:

Before the first payment. Have your contractor complete and sign it during onboarding. The form is valid for three years, so you don't need a new one for every payment.

What the contractor provides:

  • Their name and address
  • Country of residence (India)
  • PAN number (goes in the foreign tax identifying number field)
  • Signature and date

It's a simple one-page form. Most Indian contractors familiar with working for international clients have filled these out before.

2. Form 15CA and 15CB: For larger payments from India

These forms are rarely needed by foreign companies, but here's when they matter.

What they are:

  • Form 15CA: Filed by the payer to report foreign remittances to Indian tax authorities
  • Form 15CB: A certificate from a CA (Chartered Accountant) stating the remittance complies with Indian tax laws

When they're required:

Only if you're making payments from India to foreign contractors or if the Indian contractor is sending money abroad. Since you're a foreign company paying an Indian contractor, these typically don't apply to you.

The exception:

If you have an Indian entity or subsidiary paying the contractor, and the payment exceeds certain thresholds, your Indian entity may need to file these forms.

For individual payments under ₹5 lakhs (about $6,000), Form 15CA is self-certified and doesn't require a CA certificate. Above that, you need Form 15CB from a tax professional.

What you actually need

For most foreign companies hiring independent contractors in India:

If you're a US company:

  • Form W-8BEN from each contractor

If you're from another country:

  • Usually just the contractor's PAN card and invoice
  • Check your country's reporting requirements for international payments

If you have an Indian entity:

  • Forms 15CA/15CB may apply for certain payment types
  • Consult with a local tax professional

Keep it simple

Don't overcomplicate this. If you're paying Indian contractors from outside India, you're dealing with straightforward international payments. Get the W-8BEN if you're US-based, keep the PAN card on file, and maintain proper invoices.

The tax documents exist to prove compliance, not to create barriers. Just collect them during onboarding and you're covered.

How much does it cost to hire contractors in India?[toc=Cost of Contractors]

Contractor rates in India vary widely based on skill level, experience, and specialization. Here's what you can realistically expect to pay across common roles:

Comparison of Payment Methods for Contractor Payments
Payment Method Transfer Speed Fees Best For
Wisemonk Same/next day $19/month + 1% FX Companies paying multiple contractors regularly, full compliance
Wise (TransferWise) 1-2 days 0.5-2% One-off contractor payments, transparent rates
PayPal Instant to 1 day 3-5% + withdrawal fees Quick payments, very small amounts
Bank wire transfer 3-5 days $15-45 + 2-4% FX markup Large one-time payments
Payoneer 1-2 days 1-3% Multiple international contractors
Direct bank transfer (SWIFT) 3-7 days $25-50 + hidden markups High-value contracts only

The best options for most companies

  • Wisemonk is built specifically for paying Indian contractors at scale. You get same-day or next-day payouts, full compliance documentation (invoices, approvals, payment proofs), and a flat transparent fee structure with no hidden costs. The $19/month platform fee covers unlimited contractors, and you only pay 1% over the settlement exchange rate.
  • Wise works well for simpler situations where you're paying a few contractors occasionally. You see exact exchange rates and fees upfront with no hidden exchange rate markups. It's transparent and reasonably priced, though you'll handle all compliance, invoicing, and documentation yourself.
  • PayPal works in a pinch for urgent small payments, but contractors lose 3-5% when they withdraw to their Indian bank account. For a $2,000 payment, that's $60-100 they don't receive. Many experienced Indian contractors specifically ask clients not to use PayPal for this reason.
  • Wire transfers seem professional but banks bury costs in terrible exchange rates and high transfer fees. What looks like a $5,000 payment might arrive as $4,700 after intermediary banks take their cut.

USD or INR: which currency should you use?

This depends on the exchange rate trend and how you've structured the contract.

Pay in USD when:

  • You've agreed to a fixed USD rate in the independent contractor agreement
  • The Indian rupee is strengthening (contractor gets more rupees per dollar over time)
  • You want predictable budgeting in your home currency
  • The contractor specifically requests USD

Most international contractors quote rates in USD because it's stable and universally understood.

Pay in INR when:

  • The rupee is weakening (you get more rupees per dollar)
  • You're trying to save on exchange rate markups
  • You have Indian rupees from other business operations
  • The contractor prefers local currency for simpler tax filing

The exchange rate impact

Exchange rates fluctuate daily. A contractor earning $3,000/month sees different amounts in their account based on the USD/INR rate:

  • At 82 INR/USD: ₹2,46,000
  • At 84 INR/USD: ₹2,52,000
  • At 80 INR/USD: ₹2,40,000

That's a ₹12,000 swing ($145) just from rate changes. Contractors prefer USD contracts so they're protected from rupee depreciation.

How fees actually impact total cost

Let's calculate the real cost of a $3,000 monthly payment using different methods:

Using Wisemonk:

  • Base payment: $3,000
  • Platform fee: $19/month (covers unlimited contractors)
  • FX markup (1%): $30
  • Total cost: $3,049
  • Contractor receives: Full ₹2,46,000 (at current rates)
  • Includes: Invoice management, compliance docs, payment proofs

Using Wise:

  • Base payment: $3,000
  • Wise fee (1.5%): $45
  • Exchange rate: Market rate (no markup)
  • Total cost: $3,045
  • Contractor receives: ~₹2,46,000
  • You handle: All invoicing, compliance, documentation

Using PayPal:

  • Base payment: $3,000
  • PayPal send fee (3%): $90
  • Contractor withdrawal fee (3%): $90
  • Total cost: $3,090
  • Contractor receives: ~₹2,38,000 (after withdrawal fee)

Using bank wire:

  • Base payment: $3,000
  • Wire fee: $35
  • Exchange rate markup (3%): $90
  • Intermediary bank fees: $15-25
  • Total cost: $3,150
  • Contractor receives: ~₹2,40,000

When you're paying multiple contractors, Wisemonk's flat $19 platform fee becomes even more economical. Three contractors at $3,000 each means you're paying just $6.33 per contractor for full compliance and payment management.

Set up payment expectations upfront

Include in your written agreement:

  • Exact payment method you'll use
  • Which currency payments happen in
  • Who absorbs exchange rate fluctuations
  • Payment schedule (milestone-based, monthly, upon project completion)
  • Invoice submission deadlines
  • When contractors can expect payment (within X days of invoice)

Clear payment terms prevent disputes and keep your global contractors happy. Nothing damages working relationships faster than late or unpredictable contractor payments.

Pro tip: Pay contractors on a consistent schedule in the same currency using the same method. Switching payment methods creates accounting headaches and confusion about fees. Pick one efficient method and stick with it.

Why choose Wisemonk for hiring & managing contractors in India?[toc=Why Choose Wisemonk]

Wisemonk is an Employer of Record (EOR) platform that handles the entire contractor lifecycle in India, from compliant contracts and tax documentation to seamless international payments. We eliminate the legal complexity and payment headaches so you can focus on working with your contractors, not managing paperwork.

Wisemonk Contractor Payment Dashboard

What makes us different:

  1. Compliant contracts that protect you: We provide localized contracts that clearly establish independent contractor relationships and meet Indian Contract Act requirements, reducing your misclassification risk
  2. Tax compliance handled automatically: We manage PAN collection, GST documentation, and all required tax forms so you never worry about missing critical tax documents
  3. Fast, low-cost payments: Pay all your Indian contractors through one platform with transparent fees and real exchange rates, eliminating the hassle of multiple bank transfers and hidden charges
  4. 300+ global companies trust us: We've processed over $20M in payroll and manage 2,000+ workers across India, giving us deep expertise in local labor laws and contractor regulations
  5. Expert support when you need it: Get answers from our team who understand both Indian legal requirements and how international companies operate, not generic customer service

Beyond contractor management in India, Wisemonk offers end-to-end solutions including:

Our local expertise enable businesses to seamlessly expand and manage their workforce in India, reducing administrative complexities and allowing companies to focus on their core strategic objectives.

Book a Call Now!

Frequently asked questions

How to pay contractors in India from the USA?

Paying contractors in India from the USA can be done through direct bank transfers, online payment platforms and many more. However, managing compliance with Indian tax laws and currency exchange regulations can be complex. Wisemonk simplifies this process by offering a contractor management platform that handles payments, tax compliance, and invoice management seamlessly.

How to save tax as a contractor in India?

Contractors can save taxes by claiming deductions under sections like 80C (investments in tax-saving instruments) and 80D (health insurance premiums). Properly maintaining records of business expenses such as travel, equipment, and office supplies can also help reduce taxable income.

What factors should I consider when negotiating payment terms with a contractor?

When negotiating payment terms, consider the project’s scope, milestones, deadlines, and payment frequency (e.g., hourly, milestone-based, or lump sum). Ensure that both parties agree on the currency of payment and any applicable taxes like TDS or GST.

Why is India a top destination to hire and pay contractors?

India offers a vast pool of skilled professionals at competitive rates across industries like IT, marketing, and engineering. The country’s growing gig economy and favorable time zone make it an attractive destination for global businesses seeking cost-effective solutions.

What are the penalties for contractor and employee misclassification in India?

Misclassifying employees as contractors can result in back payments for benefits like Provident Fund (PF), gratuity, or health insurance. Businesses may also face fines for non-compliance with labor laws and tax regulations. Wisemonk helps ensure proper worker classification to avoid these risks.

What is the salary of a contractor in India?

Rates for contractors in India vary by industry, but skilled contractors typically charge between $20 and $50 per hour. While they are often paid in indian rupees, the total cost remains much lower than hiring full time employees in the United States.

What is the best way to pay someone in India?

Using a digital payment method that offers mid-market exchange rates and low transfer fees is the best approach. This helps you avoid the heavy exchange rate markups that banks charge and ensures contract workers receive their full payment structure without hidden deductions.

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