Contracting charges - 1% vs. 10%

Hi,

The basic diff. is wording.If you say salary ,You have to see if taxable.Other vise contract means  a manpower supplier.The contract will be there .The rate will be diff.for firm.1st u make things clear.

Hello Sir, thank you for your reply.

 

I have hired those resources for long term (1 year contract) and agreed to pay the payment monthly (Rs. 7000). Also, I am planning to pay them in cash.

 

How much charges should I deduct and do I need to deposit those deducted charges to I.T. Dept.?

 

Thanks andd Regards,

M

If you made contract, then it is the contract for professional services. you will not be paying salary but be paying service charges of Rs. 7000. If it is so, then you will have to deduct TDS @ 10% on the amount paid or credited which ever is earlier. And the deducted amount is to be paid to the credit of Central govt. till 7th of the next month.

Thank you Naresh for your reply.. So what is the difference between those two type of contracts (1% and 10% TDS deduction)? Also, could you please let me know what is better for a small IT firm in terms of legal and tax simplicity, hiring professionals on contract or on payroll? Thanks once again. M

both are contracts, but when the contract is made for providing professional services TDS is to be deducted @ 10 %. If you ask for legal & simplicity you can put them in payroll so you will not have to deduct TDS untill it cross or likely to cross Rs. 200000 in a year. But if your firm has to pay PF then you will have extra burden and you should not put them on payroll.