Deputation is when an employer sends its own employee to work at another location, client or group company for a set period, while the employee stays on the sending employer’s rolls and keeps the right to return to the parent job. The appointment letter and the employer do not change; only the place and the day-to-day work do.

Where the word comes from, and how private employers use it

The term is rooted in government service. The Supreme Court in Umapati Choudhary v. State of Bihar (1999) described deputation as a three-way, consensual arrangement: the parent employer agrees to lend the employee, the borrowing organisation agrees to take them, and the employee consents. Indian companies use the same word more loosely for three situations:

• An engineer placed at a client site in another city for a project
• A manager sent to a group company to set up a function
• An employee sent abroad “onsite” while still on the Indian payroll

The difference from a plain transfer is the third party: a transfer moves someone within the same employer. The difference from secondment is mostly about control, covered on that page.

Payroll, PF and tax during deputation

Because the deputing company remains the employer, salary, PF contributions, ESI where applicable and gratuity service all continue without a break under its registrations. A deputation or per-diem allowance is normally taxable salary, except that the part meant for touring or transfer costs is exempt to the extent actually spent: section 10(14)(i) of the 1961 Act for FY 2025-26, and Schedule III, entry 12 of the Income-tax Act, 2025 from tax year 2026-27. Salary TDS stays with the deputing employer under section 192 (FY 2025-26) or section 392 (tax year 2026-27).

Overseas deputation adds two questions. First, residential status may change, which affects what India can tax, so get advice before cutting TDS. Second, social security: if the host country has a social security agreement with India, the employer can apply to the EPFO for a Certificate of Coverage, which keeps the employee in Indian PF and exempts host-country contributions for the detachment period in that agreement. The India-UK agreement, for example, took effect on 15 July 2026. Detachment periods differ by agreement.

Frequently asked questions

Can an employee refuse to go on deputation?

In government service, consent is part of the concept. In a private company it depends on the mobility clause in the contract and any standing orders; a refusal without such a clause is hard to treat as misconduct.

Which allowances should the deputation letter spell out?

Duration, host and reporting line, any allowance and whether it is a reimbursement against bills, travel and stay arrangements, and the return date. Bill-backed travel claims are what keep the exempt portion defensible, as the Section 10(14) allowances page explains.

Does leave policy change while someone is deputed?

Not legally. Leave accrues under the parent employer’s leave policy, though the host’s holiday calendar usually applies in practice. Record both in the letter to avoid disputes on return.

If deputations abroad are becoming routine, read how multi-country payroll handles salary, tax and social security across borders.