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Working as a consultant vs employee - tax implications

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achivement

Professional

21 Points Posted on 16 June 2016

If a individual is registering a consultancy firm or company ( company A) and provides services to another company( Company B) , instead of working as a employee for company B, how the tax implications will change ?

I understand, if the consultant fee is received in the name of company A, then the expenses incurred, inculding electricity charge, fuel charge, car maintenance, assistant salary, stationary, and every bill used to provide the consultancy can be deducted from the taxable income.

I also want to know, if the consutancy is for Information technology services ( Software), does it attract service tax, if yes, how much ?

What will be the pros and cons ( Specific to TAX) of doing the same service

Thanks in advance

Ashok

Replies (1)

CA Brijendra Tripathi

Consultant

115 Points Posted on 18 June 2016

Dear Sir,

You need to consider various things.

1. Formation of Company will cost you much v/s salary. If you are going to provide your services to onlyone company then you may consider for becoming a consultant & get your Tax deducted u/s 194J. The position will remain same for the expenses. All the expenses are allowable.

2. The service you have mentioned is fully taxable, but you can avail Exemption under notification no. 33/2012 upto 10 Lacs Turnover.

I hope this solves your problem.