2

I have seen various replies but I would just like to confirm about my case as its my first time. I have been offered a consultant position and the company said there is no tax deducted at source. So this means tax is deducted at my end. I would be working in India for a Canadian company.

My question is,

  1. If the compensation that I receive is over 10 lakhs, how much would be deducted as tax. I will also state what I have read and got to know. ie
    a) Service tax 12.36% on the total compensation
    b) First 2 lakh exempt
    c) Next 3 lakh, 10% tax
    d) Next 5 lakh, 20% tax
    e) Rest, 30% tax f) Education cess i.e. 3% on the total tax ie a+c+d+e
  2. So are these the right taxes and % that Need to be paid? If not do let me know the correct deductions.
  3. Is the process of deductions mentioned above the same for any amount over 10 lakhs ? If not do let me know the correct tax brackets
  4. What others legal options I have to decrease the tax liability? As an employee of my ex company I had once taken an FD (that reduced my tax)
  5. Anything else I should keep in mind when signing a contract as a consultant, this will be a full time position.

Thanks in advance

  • 1
    Are you sure you don't have to also file taxes in Canada? – karancan May 18 '14 at 14:13
  • no, there is no TDS. so i am getting the full amount in hand. – X-jo May 20 '14 at 4:07
1

1.If the compensation that I receive is over 10 lakhs, how much would be deducted as tax

No tax will be deducted by the company. You have to calculate the tax and pay in Advance by yourself. There are quite a few Banks that give you online facility to pay your tax. There is no service tax. Otherwise the tax slabs are right. The current budget has slightly revised the tax brackets.

2.So are these the right taxes and % that Need to be paid? If not do let me know the correct deductions.

Yes. Revised brackets for financial year 2014-2015 are NIL for first 2.5 lakhs. Other brackets are unchanged.

4.What others legal options I have to decrease the tax liability? As an employee of my ex company I had once taken an FD (that reduced my tax)

The options are same as salaried, i.e. you can claim exemption under 80C or on interest of housing loan, etc. As a consultant certain expenses can also be deducted.

You should also talk to a CA who can help you with this as there will be some paperwork involved.

1

I would look into the possibility that the promise "that no taxes will be withheld" is all about your status as a 'consultant'. They may be meaning you to be treated like a business they buy services from. In Canada the distinction is very watery and I presume the same in India.

If you agree to become a business, then you must look into how that business income will be taxed.

  • I agree, the company is saying "you're a company, bill us, we'll pay your bill" not "you are our employee and we will pay you salary but not take taxes from it." This is much easier and cheaper for them and puts the effort onto you. – Kate Gregory Aug 1 '14 at 13:01
0

This is how a consulting engagement in India works. If you are registered for Service Tax and have a service tax number, no tax is deducted at source and you have to pay 12.36% to service tax department during filing (once a quarter). If you do not have Service tax number i.e. not registered for service tax, the company is liable to deduct 10% at source and give the same to Income Tax Dept. and give you a Form-16 at the end of the financial year. If you fall in 10% tax bracket, no further tax liability, if you are in 30%, 20% more needs to be paid to Income Tax Dept.(calculate for 20% tax bracket). The tax slabs given above are fine.

If you fail to pay the remainder tax (if applicable) Income Tax Dept. will send you a demand notice, politely asking you to pay at the end of the FY.

I would suggest you talk to a CA, as there are implications of advance tax (on your consulting income) to be paid once a quarter.

  • Hi this is where i have my doubts. I haven't(as per my knowledge) registered for service tax. But there is no tax deducted from source(ie my client in Canada gives me how much is mentioned in the contract) since i don't, how will the canadian company deduct 10% and give to income tax dept in india? – X-jo Aug 2 '14 at 10:42
  • @X-jo, if the company does not deduct the tax and since you are not registered for service tax, you shall have to pay tax at your tax slab rate. The tax has to be credited per quarter as per Income Tax Dept. rules. So in your case, I suppose if you pay the taxes due, it shall be fine, get in touch with your CA for giving the tax, their charges will be minimal or you could also do it through the website of IT dept. But it is better to go to the CA. P.S. as a consultant you are eligible to show expenses of up to 40% of your consultancy income, check with the CA – Ironluca Aug 4 '14 at 8:57

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .