Income taxation for contract employees

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S. Krishnan

Consultant

24 Points Posted on 11 June 2011

Hi, for an individual who is employed by a software company as a contract consultant (directly by the company and not through a contract agency) and is paid monthly based on an hourly billing rate and hours worked during the month: (i) Is the individual's income treated as business income or a salary?, (ii) If it is treated as business income, should the individual maintain a book of accounts and be audited?, (iii) if an audit is required, what is the minimum annual income that would trigger an audit for the individual?, (iv) What ITR form should the person use? Is it ITR 4? and (v) Does this form of employment attract service tax?

Fyi, the employer is deducting TDS of 10% under Section 194J. The individual is an independent contractor and is not registered as a company. Thanks a lot for your response.

Regards,

S. Krishnan

Replies (3)

CA. Roopali Kadam

Jobs on assignment basis.

1481 Points Posted on 11 June 2011

Originally posted by : S. Krishnan
	Hi, for an individual who is employed by a software company as a contract consultant (directly by the company and not through a contract agency) and is paid monthly based on an hourly billing rate and hours worked during the month: (i) Is the individual's income treated as business income or a salary?, (ii) If it is treated as business income, should the individual maintain a book of accounts and be audited?, (iii) if an audit is required, what is the minimum annual income that would trigger an audit for the individual?, (iv) What ITR form should the person use? Is it ITR 4? and (v) Does this form of employment attract service tax? Fyi, the employer is deducting TDS of 10% under Section 194J. The individual is an independent contractor and is not registered as a company. Thanks a lot for your response. Regards, S. Krishnan

1. business income

2. & 3. if turnover >15lacs maintain books and audit compulsory. (I am not sure of maintenance of books if <15lacs)

4 ITR4

Paras

Mcom CA Final

122 Points Posted on 12 June 2011

In approval of above i add ...books need to be maintained u/s 44AA if income is above rs.120000,attracts service tax if in preceding year taxable services rendered above rs.1000000.

gloria

Programmer

30 Points Posted on 12 July 2012

@ Paras, Havent understood your answer. I have a similar scenario. Person was contracted to get 20K per month and the employer is deducting TDS of 10% under Section 194J.The person also invested Rs 50000 in tax saving sources. Then does 50K get deducted from taxable income? Would he have to pay extra tax? or will just filing ITR4 suffice?