Hi,
If the employee is currently on regular rolls signing the Attendance Register then better move the employee to rolls of a Retainer Contract . You may credit the salary after adjusting the TDS in his Indian Bank Account. TDS certificate to be issued on yearly basis and it up to the employee to file the income tax returns.
If the employee is going to use his own system/laptop then include company confidentiality terms in the letter of contract. Specify the work timings. Better discuss whether the employee is going to dedicate his work as a full time consultant or part time consultant.