One is a question of “when”. The other is a question of “if”. The distinction reshapes both FEMA compliance and tax outcomes.
Deferred consideration: fixed amount, deferred payment. Permitted under FEMA NDI Rules (18 months, 25% cap). But capital gains tax accrues on Day Zero, including the portion not yet received. Cash flow mismatch is a real structuring concern.
Contingent consideration: variable amount, milestone-dependent. Not permitted for inbound transactions under FEMA, unless routed through escrow. Tax law does not resolve whether the earnout, when received, is capital gains or income from other sources.