Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

EMPLOYEE OR CONSULTANT? MAKE YOUR SMART CHOICE!

Opting to be a Consultant gives the Privilege of claiming

Many Deductions not available from Employee Remuneration!

 

Anand Roy is offered a marketing work assignment by a company with an annual package of Rs.8,80,000 during FY 2010-11 and he is given the choice to either join the company as an employee or offer his services as a consultant. Weighing the income-tax implications in respect of the same, he is wondering what should be his best choice.

If Anand decides to accept the status of an employee, he needs to be aware of the fact that he would have a comparatively limited choice of exemptions that he can claim from his taxable salary income of Rs.8,80,000. These could possibly be structured in the form of Transport Allowance of Rs.9,600, Children’s Education Allowance of Rs.2,400, Reimbursement of Medical Expenses of Rs.15,000, Attire Allowance of Rs.18,000 and Food Coupons for a value of Rs.15,000, in all amounting to Rs.60,000. This would still leave his taxable salary at Rs.8,20,000 and even after deducting Rs.1,20,000 as the eligible deduction under Section 80C and 80CCF, income-tax of Rs.76,220 would be deducted at source by his employer on his Total Income of Rs.7,00,000.

However, if Anand goes for the choice of becoming a consultant to the company and accepts the consideration of Rs.8,80,000 as professional fees, he would enjoy distinct tax advantages as explained hereinafter.

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Prepare for the TDS Nightmare!

No Respite From The TDS Bite Even For Non-Taxpayers!

TDS Blows That Will Hit You Hard!

  • No provision for furnishing any declaration (as in current Form 15G/15H) for non deduction of TDS from interest in cases of non-taxable income will hit hard senior citizens, widows, agriculturists and several other small interest earners.
  • No provision for obtaining any certificate for TDS at a lower rate will create hardships for the business community.
  • Harsh and bizarre consequences to arise on account of the new provision prescribing 10% TDS in respect of payments of ‘any other income’.
  • Even personal and commercial transactions, such as receipt of any consideration for sale of goods or services or transfer of any movable or immovable property, to attract TDS, which in several cases could work out much higher than the actual profit earned from the transaction. (more…)
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