Employer of Record for Startups and Funded Companies in India

Last reviewed July 2026 — ESOP tax rules, DPIIT status, and the Finance Act 2024 Angel Tax abolition checked current.

From seed round to Series B, put your software engineers, product managers, and growth teams on India payroll in 2 to 3 days - no local entity, no compliance overhead, and due diligence ready from your first hire.

Employer of Record for startups and funded companies hiring engineers in India without a legal entity

How to Build Your India Team From First Hire to Series B, Without an Entity

India produces 2.8 million engineers annually and hosts the world’s third-largest startup ecosystem, making it the default hiring market for funded companies from seed through Series B. Most early-stage startups hire engineers and product managers as contractors to preserve runway, skipping PF, ESI, and employment contracts. Those compliance gaps accumulate and surface during investor due diligence, delaying or complicating the next funding round at the worst possible moment.

TankhaPay’s Employer of Record (EOR) service puts your India team on compliant payroll from Day 1: employment contracts executed, PF registered, ESI enrolled, and TDS filed, without incorporating an entity or managing compliance internally. Whether hiring your first Bengaluru engineer or scaling to 50 across four cities, every hire is due diligence ready and on payroll in 2 to 3 days.

TankhaPay employer of record for startups and funded companies hiring engineers across India

Why Startups and Funded Companies Choose TankhaPay EOR

Hire software engineers, product managers, and growth teams in 2 to 3 days, not after 3 to 6 months of entity incorporation and EPFO setup
No local entity, no subsidiary, no compliance infrastructure required from first hire at seed to hundredth hire at Series B
Due diligence ready from Day 1: PF, ESI, TDS records and employment contracts that survive Series A and Series B investor audits without findings
Contractor misclassification eliminated: every early hire correctly classified with IP assignment, statutory benefits, and full employment documentation from Day 1
Serves B2B SaaS, fintech, edtech, healthtech, and deep tech startups across Bengaluru, Mumbai, Delhi NCR, Hyderabad, and Pune, including EOR for IT and tech companies and EOR for manufacturing companies

TankhaPay is the default India hiring infrastructure for funded companies that cannot afford compliance gaps before the next funding round.

How to Hire Your First India Employee Before Incorporating an Entity

Step 1: Engage TankhaPay and define the role. No need to register firms in India and no other type of registration under MCA is required for start-ups. Job profile, salary, and location are defined by the hiring firm. TankhaPay will verify the rules of the state with respect to the Shops and Establishment Act and Professional Tax before preparing the offer letter.
Step 2: Candidate offer and acceptance. The hiring firm will do their own recruitment and offer the candidate an offer letter. There is no involvement of TankhaPay whatsoever in candidate selection and interviews.
Step 3: Execution of employment contract under Indian law. After receiving an offer letter from the applicant, TankhaPay will draft the employment contract, which will include an IP assignment in accordance with Section 17 of the Copyright Act, 1957.
Step 4: PF, ESI, and TDS registration. TankhaPay will get your employees registered under the Provident Fund as per the Employees Provident Fund and Miscellaneous Provisions Act 1952 and the ESI registration process as per the Employees State Insurance Act 1948 and also get the TDS configured under section 192. Everything will be taken care of by TankhaPay’s registrations, and not yours.
Step 5: First do a payroll run. Once your employees are ready for payroll processing in India, it will be done within 2 to 3 days from acceptance of your offer letters.
Step 6: Ongoing compliance and audit-trail maintenance. Every payroll cycle, every statutory filing, and every employment record will be maintained by TankhaPay starting Day 1. It will be the one thing that your next funding round will ask for.
Investor due diligence ready compliance for Series A and Series B startups India EOR

Due Diligence Ready From Day 1: What Series A and Series B Investors Actually Check

Before a Series A or Series B term sheet converts to a close, investors conduct HR and compliance due diligence. Common findings include employees misclassified as contractors without PF or ESI registration, employment contracts never executed, TDS not filed under Section 192, and no POSH policy under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013. Each finding requires remediation before the round closes, delaying capital and raising legal costs.

TankhaPay EOR builds a clean compliance record from your first hire: executed employment contract, PF registration under the Employees Provident Fund and Miscellaneous Provisions Act 1952, ESI enrolment under the Employees State Insurance Act 1948, TDS filing under Section 192, and POSH documentation. When investors request HR records before your next round, every document exists and is audit-ready. Funded companies consistently list TankhaPay among the top EOR companies in India.

What TankhaPay Handles: Compliance, ESOP, Payroll, and Exit

Compliance From Day 1: Due Diligence Ready

Funded startups that build clean compliance from their first hire eliminate the most common obstacle to closing a round: HR due diligence findings that require costly remediation before a Series A or Series B closes.

PF at 12% employer contribution, ESI at 3.25%, TDS under Section 192, and Professional Tax, all registered and filed from Day 1 through TankhaPay's payroll management platform
Employment contracts executed for every hire - permanent, fixed-term, and project-based - fully compliant with the applicable Shops and Establishments Act in each state
Complete audit trail maintained: payroll records, statutory filings, and employment documentation always ready for investor due diligence requests at any funding stage
Due diligence ready compliance for funded startups India EOR from seed to Series B

Contractor to Employee Conversion

Most early-stage startups hire engineers and growth leads as contractors to preserve runway, creating compounding PF, ESI, and IP liability that surfaces in every subsequent due diligence.

Misclassification assessment: audit of existing contractor relationships and reclassification to compliant employment under the Contract Labour (Regulation and Abolition) Act 1970 where required
Retrospective compliance resolution: PF, ESI, and TDS corrections structured through a managed transition plan before the next investor audit window
IP ownership secured: employment contracts with present and future IP assignment clauses issued at conversion point under Indian Copyright Act Section 17
Contractor to employee conversion IP assignment compliance for funded startups India

ESOP and Equity Payroll Management

ESOP vesting creates payroll obligations most EOR platforms cannot handle, getting this wrong creates TDS penalties and Form 16 errors for every affected employee.

ESOP perquisite tax computed under Section 17(2) of the Income Tax Act 1961 at vesting, taxable value deducted through monthly payroll, Form 16 updated, Form 24Q filed quarterly
Exercise price versus fair market value differential correctly calculated and integrated into TDS workings each monthly payroll cycle
ESOP tax deferral for eligible DPIIT-recognised startups under Section 192(1C) of the Income Tax Act 1961 managed correctly to avoid penalties; see global mobility services for cross-border equity structures
What DPIIT Recognition Means for Your ESOP Tax Treatment: DPIIT (Department for Promotion of Industry and Internal Trade) recognition is the designation by which a private limited company becomes eligible to be considered a startup under the Startup India initiative. A private limited company makes an application through the Startup India portal. This recognition is the requirement necessary for the deferral of ESOP TDS under section 192(1C), which is managed by TankhaPay for its eligible clients. Not every funded startup has this recognition, so verify your eligibility before considering this deferral option for your vested employees.
Angel Tax Is Abolished: What This Means for Your Next Round: Clause 56(2)(viib) of the Income Tax Act 1961, also referred to as Angel Tax, has been repealed for all types of investors, local and foreign, with effect from 1 April 2025 (starting FY 2025-26), according to the Finance Act 2024. No tax is payable by the company anymore for share premium received in excess of the fair market price on the new funding round. This ends the controversy that earlier made the completion of the funding rounds complicated for both local angels and foreign VCs. The TankhaPay platform keeps track of this development, among others, as well as every regulatory change impacting the funded entities since the laws governing startups extend beyond employment.
ESOP perquisite tax payroll management Section 17(2) Income Tax Act for funded startups India

Remote and Distributed Team Payroll

India’s startup talent spans Bengaluru, Mumbai, Delhi NCR, Hyderabad, and Pune. Each state has different Professional Tax rates, Shops Act rules, and Labour Welfare Fund requirements that apply from the first hire in that location.

Multi-state payroll with Professional Tax, Labour Welfare Fund, and Shops Act compliance per employee location, no additional setup required per state or city
Remote onboarding in 2 to 3 days anywhere - a Bengaluru engineer and Mumbai product manager both on payroll within one business week
POSH Act compliance including external ICC structure for startups under 10 employees under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013
Remote distributed startup team payroll multi-state compliance Bengaluru Mumbai Delhi NCR India

Startup Offboarding and Exit Management

Startup teams change fast: pivots, restructuring, and performance exits require clean offboarding that does not leave open compliance liabilities before the next investor review.

Full and final settlement under the Payment of Wages Act 1936: earned leave encashment, gratuity check under the Gratuity Act 1972, and TDS on exit payments processed within statutory timelines
Form 16 issued, PF account transfer or closure initiated, ESOP vested grant documentation and any cancellation records managed through the offboarding process
Relieving letter, experience certificate, and NOC issued, all documentation investor-grade and audit-ready for future due diligence requests
Startup offboarding exit management full and final settlement ESOP documentation India EOR
Founders CFOs and early startup employees benefiting from TankhaPay EOR India

Built for Founders, CFOs, and Every Stakeholder in Your Funded Company

Different stakeholders in a funded company need different things, and TankhaPay covers all of them without the compliance load landing internally.

Founders and Co-founders: get your first 10 hires on payroll in 2 to 3 days, stop managing PF filings and employment contracts, stay focused on product and growth milestones
CFOs and Finance Leads: flat predictable monthly fee, no compliance penalties, clean books for the next fundraise, complete audit trail ready on demand
Early Team Members: payroll on time, PF and ESI enrolled from Day 1, ESOP records maintained, HR support accessible through TankhaPay’s employee portal
Companies that are at Growth Stage & Series C+: If your India team is constantly crossing the 50-employee mark, EOR will continue being the model till the time you set up your company, with a bulk onboarding process across various cities & a higher frequency of vesting ESOPs.

Why Funded Startups Trust TankhaPay to Build Their India Teams

Why hiring speed defines startup success in India.
Hiring velocity in India’s startup ecosystem is not optional; it is the variable that determines whether you make your product milestone, stay on track for your funding round, or lose ground to a competitor who moved faster. Bengaluru engineers hold three to five concurrent offers at any given time. A two-week hiring delay is two weeks of runway burned against a competitor who has already moved. Incorporating a private limited company in India takes 3 to 6 months: MCA registration, GST, TAN, EPFO setup, and state-wise Shops and Establishments Act compliance. That is startup-dead time. TankhaPay onboards the first India hire in 2 to 3 days from offer acceptance. Your competitor is not waiting for your MCA registration to clear.

Why compliance cannot be deferred until Series A.
Founders defer compliance for logical reasons: burn rate pressure, product urgency, team bandwidth. But compliance debt compounds. A startup that hires 15 engineers as contractors for 18 months at seed stage arrives at Series A due diligence with PF arrears generating damages of 12 to 25% under Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act 1952, ESI defaults under Section 85 of the Employees State Insurance Act 1948, and TDS interest under Section 201 of the Income Tax Act 1961. Additionally, IP created under contractor agreements remains with the contractor by default under Indian Copyright Act Section 17, not the company. Retroactive correction costs significantly more than Day 1 compliance. TankhaPay’s zero compliance penalty record across 1,000+ client companies since 2000 is the proof.

Why India specialisation beats global EOR platforms for startups.
Global EOR platforms add India to a list of 150 to 180 countries but route employment through local aggregators with no direct accountability for ESOP perquisite tax processing under Section 17(2) of the Income Tax Act 1961, multi-state compliance for distributed teams across Bengaluru, Mumbai, and Delhi NCR, or the documentation trail institutional investors require before a Series B closes. TankhaPay has operated exclusively in India for 26 years under AKAL Information Systems Ltd, CMMI-appraised, ISO 9001, 27001, 20000, and 14001 certified, serving B2B SaaS, fintech, edtech, healthtech, and deep tech startups from seed to Series B. When institutional investors see a TankhaPay compliance record during due diligence, they see an infrastructure that has been operational since before most current startup founders entered the workforce.

Why senior hires need a faster path out of their notice period.
Notice periods of 60-90 days are standard practice for senior hires such as VPs, engineering heads, growth heads, etc. This is not an issue related to general hiring timescales: you have found the right candidate, but he/she is tied down for two to three months. TankhaPay ensures that the notice period buyout is done in a manner that is compliant with the Payment of Wages Act 1936. The company does the calculations, processes the notice period buyout via the right payroll channels, deducts TDS on the amount of buyout, and takes care of all the paperwork related to the exiting employee.

Why institutional clients and India-specific depth set TankhaPay apart.
Bank of Baroda, the National Informatics Centre, the National e-Governance Division, Software Technology Parks of India, and the Ministry of Ayush all run TankhaPay through their own vendor due diligence and use it. Investors reviewing a portfolio company's HR vendor during Series A or Series B diligence recognise that standard. Each of Deel, Remote, and Rippling works with 80 to 150+ countries, including India among other countries. None of these three currently provide any information on the Indian ESOP taxation process, DPIIT recognition, or investor due diligence requirements. TankhaPay does provide such information because it has been working only in India since 2000 and has constructed its compliance architecture on the above basis: Section 17(2) of Income Tax Act 1961 for ESOP perquisite tax, Section 192(1C) of Income Tax Act 1961 for tax deferral of DPIIT-recognized startups, and due diligence documentation that can survive Series A and B audits.

Ready to Build Your India Startup Team the Right Way From Day 1?

From seed stage to Series B, get engineers, product managers, and growth teams on India payroll in 2 to 3 days. No entity needed. Due diligence ready compliance from your first hire to your next funding round.

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Frequently Asked Questions About EOR for Startups and Funded Companies in India

01.What is an Employer of Record for startups and funded companies in India?

An Employer of Record for startups in India is a legally registered entity that becomes the official employer of your team from Day 1 — unlike a PEO, where the client company remains the legal employer. TankhaPay handles employment contracts, Provident Fund under the Employees Provident Fund and Miscellaneous Provisions Act 1952, ESI under the Employees State Insurance Act 1948, TDS under Section 192, and full statutory compliance. You retain operational control. TankhaPay creates a due diligence ready employment record from your first hire at seed stage.

Yes. A foreign seed-funded or Series A startup can hire software engineers, product managers, and growth teams in India through TankhaPay without incorporating a private limited company or establishing a branch office. TankhaPay becomes the legal employer, neutralising permanent establishment risk under the Income Tax Act 1961. Employment contracts, PF, ESI, and TDS are fully managed. First hire is on India payroll in 2 to 3 days.

TankhaPay EOR creates a clean HR record from Day 1: executed employment contracts, PF registered under the Employees Provident Fund Act 1952, ESI enrolled, TDS filed under Section 192, and POSH documentation under the Sexual Harassment of Women at Workplace Act 2013. When investors request HR records before a Series A or Series B closes, every document exists and is audit-ready. Compliance gaps found during due diligence delay rounds; EOR from Day 1 prevents them.

TankhaPay manages the transition: contractor audit, reclassification under the Contract Labour (Regulation and Abolition) Act 1970, retrospective PF and ESI corrections, and new employment contracts with IP assignment clauses. Going forward, every converted employee has a clean statutory record. Investors who find contractor-to-employee transitions handled properly in due diligence respond significantly better than those who find outstanding retrospective liabilities with no remediation plan.

When ESOPs vest, the difference between exercise price and fair market value on the vesting date is a taxable perquisite under Section 17(2) of the Income Tax Act 1961, deducted through the monthly payroll run. TankhaPay calculates this correctly, integrates it into TDS workings, and updates Form 16 and Form 24Q. For eligible DPIIT-recognised startups, the perquisite tax deferral under Section 192(1C) is also managed.

Yes. TankhaPay manages payroll and statutory compliance across all 28 states from one platform, applying the correct Professional Tax rate, Labour Welfare Fund contribution, and Shops and Establishments Act compliance per employee location automatically. A Bengaluru engineer, Mumbai product manager, and Delhi NCR growth lead are all on payroll within 2 to 3 days, each covered by their state-specific rules without any additional setup from your side.

Contractor misclassification is when a startup hires workers as independent contractors when the working relationship (regular hours, directed work, dedicated engagement) meets the definition of employment under Indian labour law. PF and ESI liability accumulates retrospectively, TDS obligations apply, and IP created by contractors remains with the contractor under Copyright Act Section 17, not the company. Series A investors routinely surface this in due diligence. EOR eliminates contractor misclassification risk from Day 1.

Yes. TankhaPay provides POSH Act compliance under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 for all EOR-employed staff. For startups with fewer than 10 employees who cannot form an Internal Complaints Committee, TankhaPay supports the external committee structure the Act requires. POSH documentation is maintained as part of the employment record, increasingly a standard due diligence request before Series A closes.

TankhaPay charges a flat monthly fee per employee with zero setup cost. Setting up a private limited company costs INR 2 to 5 lakh upfront plus an ongoing compliance function. One missed PF filing generates damages of 12 to 25% of arrears under Section 14B of the Employees Provident Fund Act 1952, often exceeding a full year of EOR fees. See EOR pricing for startups for a direct comparison.

Most startups consider entity setup when the India team consistently exceeds 50 employees, India revenue generation justifies the legal overhead, or Series B institutional investors require a local entity for governance. Before that threshold, EOR is consistently more cost-efficient and faster. TankhaPay supports the transition when the time comes: payroll migration, compliance record transfer, and staffing and recruitment services for continued growth within the new entity.

A parent company outside India, like a Delaware C-Corp or Singapore Pte Ltd, which awards equity to the Indian employee hired via TankhaPay EOR would have both Section 17(2) perquisites and FEMA 1999 regulations governing tax implications of that equity. TankhaPay has drafted its employment agreements in a way that will govern that equity as an employment perquisite taxed separately from any other financial arrangement under FEMA regulations.