Consultant vs employee

Hi,

I have been interviewed for a company. I asked for a salary of 13L per annum. They gave me two options.  I can either be consultant with a take home of around 99K per month. Or I can be a full time employee with them with take home of around 85K per month. Which would be a better choice from financial point of view ?
Asked 8 months ago in Income Tax from Chennai, Tamil Nadu
It depends on your post and your qualification. If you meet the criteria mentioned in section 44A then you should opt for consultant because then finance bill 2016 allows you to avail 50% flat exemption on your total salary. In your case you have to pay tax on 6.5 lakhs only.

However, you can avail above exemption only if you are into below mentioned profession :

Accountancy
Architectural
Authorised Representative
Company Secretary
Engineering
Film Artists/Actors, Cameraman, Director, Singer, Story-writer,etc.
Interior Decoration
Legal
Medical
Technical Consultancy

If you are not into above profession better opt for full time employment because its hassle free. However, it may result into little higher taxation

We can further discuss both the cases, if you feel so. We may structure your salary in best possible manner. 

Thanks and Regards,
CA Abhishek Dugar
caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
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please find service tax implications belwo:

You have to pay service tax @14.50% plus 0.5% krishi kalyan cess as per finance bill 2016 on the total value of services provided I.e. 13,00,000. However you can claim input tax credit of service tax paid on your telephone bill, net bill etc.

For that you have to apply for service tax registration number.

As far as income tax is concerend, you have following two options:
1. Avail benefit of presumptive taxation and pay income tax on 6,50,000. In this case you don't need to maintain detailed books of accounts.

2. Maintain books of accounts. Derive profit from consulting services after deducting all your expenses and pay tax on such profit.

In my opinion option one is better.

It is strongly recommended to take expert advice and structure your package in tax efficient manner. 

Feel free to contact me in case you require any assistance on the above.

Thanks and Regards,
CA Abhishek Dugar
caabhishekdugar@gmail.com



Abhishek Dugar
CA, Mumbai
761 Answers
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If you take amount as consultant then there will be many options like claiming expenditure etc.
Yes you need to pay service tax which is 14.50% as of now.

If you are working as salaries then you can have HRA Deduction and the remaining will be taxed according to the tax slabs applicable.

We think that consultant option is better even if service tax is paid from your side
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Just hold on...you meant service tax will be borne by you and not your employer.

Then you may not go for consultant. you should opt employee.

Need more facts to better understand the situation. You can save or loose tax amounting to INR 70000-100000 depending upon your decision. 
Abhishek Dugar
CA, Mumbai
761 Answers
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Dear Sir,

In my opinion it is always better to be consultant for financial comfort and ease of operation.
Vishrut Rajesh Shah
CA, Ahmedabad
229 Answers
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Dear Sir,

After going through your case, it appears that you are given 2 options of either a Consultant or a Full Time Employment.

And if I am not wrong then, if you opt for Consultant option then you will have to shell out the Service Tax Component from your Take Home which will be to the tune of aprrox Rs.170,000/- which is an additional burden to you and also reduces your income by approx Rs.14,000/- per month. Which is not advisable. You can re-negotiate your terms and ask your Company to bear the Service tax.

If the Company is not willing to re-negotiate then it is advised to opt for Full Time Employment and structure your Salary in a Manner that your Tax Outflow is reduced to the minimum.

If your Company allows you to structure your salary and you need any assistance to reduce the tax outflow to the minimum, then feel free to call.

Trust this clarifies your query. 

Feel free to get back/ call back for any further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP 
Rohit R Sharma
CA, Mumbai
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Dear Sir,

If you want exact calculation of your take home salary and tax outgo, I have to do the calculations and will get back to you.

But I am pretty sure that in your case employee option is far better than consultant considering the compliance involved and tax outgo.

Regards,
CA Abhishek Dugar
caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
761 Answers
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Dear Sir,

As said earlier if you have to pay Service Tax from your own pocket, then Full Time Employee is a better alternative. Your take home would almost be the same in both the cases but in the case of employee the amount of PF & Gratuity will not form part of take home but will act like a saving and create a corpus for you in the long run.

So you can take a call based on your convenience & priority.

Trust this clarifies your query. 

Feel free to get back/ call back for any further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
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Sir we have seen your case.

In consultancy receipts you can claim expenditure and reduce your profit and inturn your tax will also be minimal.
The TDS Deducted by the company can be claimed at the time of filing return of income.

You can get refund from department if after all calculations your tax is less than the TDS amount.

In case of salary you will be paying more when compared to consultancy income even after paying service tax from your side.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Dear Sir, 

For your tax benefit , you need to understand some points firstly:

1. In case you take salary, then tax benefit would be less.

2. In case you take amount as a consultant then it would be covered under business income and we can claim expenses in that, which would lead to lower tax liability.

3. As far as Service tax is concerned, we can plan that also to reduce that liability. For that you may contact us.

4. TAX Planning would help you to reduce your TAX Liability to a big extent

You may contact us at:
ca.skagarwal@gmail.com
Shiv Kumar Agarwal
CA, Delhi
195 Answers
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