How Will Becoming Direct Employees of a U.S. Company Affect Our Taxes and Benefits?

Hi, Brief on our current structure: Indian entity registered as a subsidiary of a U.S. registered company. Three employees, residents of India, are on the payroll of the Indian Entity working remotely. Now, starting from April, they are shutting down the Indian entity and making all three Indian resident employees direct employees of a U.S. registered company, working remotely from India. For employees, what will be the benefits and issues?

Taxation Changes for Employees

One thing they communicated is that we will have to handle the taxation of India at an individual level. Just wanted to understand the new process. Currently, we provide investment proofs to Indian employers, and they deduct tax and file that to the government. Then using that Form 16, we file our income tax returns.

Impact of New Employment Model

How will all this change in the new employment model in which we are employees of the U.S. entity? Please guide further on this. Right now, we have the option to object to this proposal if there are any issues.

**Location**: Hyderabad, India foreign company, income tax, tax returns, new process, Country-India, City-India-Hyderabad

Tax Implications and Process Changes for Indian Employees Becoming Direct Employees of a U.S. Entity

Given the transition from being employees of an Indian entity to direct employees of a U.S. registered company, there are several key considerations regarding taxation, benefits, and processes that will impact the employees. Here's a practical guide to understanding the implications and navigating the new employment model:

🌐 Taxation Process Changes:
1. As direct employees of a U.S. entity, you will now be responsible for handling your individual taxation in India.
2. The U.S. company may not withhold Indian taxes from your salary, unlike the Indian entity that deducted taxes at the source.
3. You will need to ensure compliance with Indian tax laws, including filing your income tax returns independently.

💼 Benefits and Issues:
1. Benefits:
- Potential access to U.S.-based benefits offered by the new employer.
- Simplified reporting and potentially streamlined processes under U.S. employment.
2. Issues:
- Increased responsibility for managing your tax affairs in India.
- Potential differences in benefits and employment regulations between India and the U.S.

📝 Action Steps:
1. Review the tax implications and seek guidance from a tax consultant to understand your obligations under Indian tax laws.
2. Communicate with the U.S. entity to clarify any uncertainties regarding benefits, payroll, and tax-related matters.
3. Evaluate the overall impact on your financial situation and assess the feasibility of the new employment model.

🔍 Objecting to the Proposal:
1. If you have concerns or objections regarding the proposed changes, discuss them with the relevant stakeholders.
2. Seek clarification on how the transition will affect your employment terms, benefits, and tax obligations.
3. Consider consulting with legal or HR professionals to assess your options and potential implications of objecting to the proposal.

Navigating the shift from being employees of an Indian entity to direct employees of a U.S. company requires a thorough understanding of the tax implications, benefits, and potential challenges. By proactively addressing these aspects, you can make informed decisions regarding the proposed employment model.