I have received an offer from company in UAE for work in India and I live in Mumbai. They said that they can't give me a formal offer as they don't have PE in India and they can sign agreement with me as a consultant. They will pay me in INR without deducting any TDS and PF.
How can this affect my employment record?
Are there any issues accepting such offer ?
Employment record will be blocked for such period till you are with the UAE company; but the same can be gained in leu of Dirham and knowledge. If they can provide you guarantee for some longer period, same would be attractive.
Can they take me on Dubai payroll and I work from India ? Is that possible?
Please advise
Yes, possible. But that won't change any taxability of the income earned by you as per I T act, 1961.
Paying taxes is not an issue. I can do that.
Just joining on basis of agreement as a consultant feels insecure and I will have no employment record to show for this period.
I think i should propose them this option of puting me on Dubai payroll and I work from India
Are there any other solutions to my problems?
Thanks a lot for your advice sir.
I don't think working as consultant impact your employment record for the purpose of new job in future. Foreign company which doesn't have any fixed base in India won't take a risk to take you on employment when you are working in India as this would create PE exposure for foreign company and therefore, their income would be taxable at very high income tax rate. This is the case with all foreign companies that doesn't have any PE in India.
You can mention your future employers as you were appointed as consultant as company cannot appoint you as employee because of reasons mentioned above, in short PE issue and shall show your consultant contract in support of your scope of service. They would understand your case very well looking at the strict tax rules in India. I had a similar case 10 years back wherein I was working as tax consultant for about 1-2 years and then during next interview, employer agreed with my explanation and doesn't consider that period of 1-2 years as employment gap as I was performing same set of services. Of course, this depends on case to case. But with above explanation, it is likely to be accepted. Having said that, your emoluments shall commensurate with risk associated with your onboarding as consultant instead of as an employee.
The major advantage you would be having is on taxability under Income Tax Act. Being hired as consultant, you would be entitled to 50% deduction of the total gross receipts from UAE company and the balance 50% would be deemed to be your taxable income which further subject to reduction on account of 80C and other deduction under chapter VI-A of income tax act. As against this, if hired as employee will not entitled you any benefits except HRA deduction and standard deduction of Rs.50k. Tax would be lesser in case of consultant as salaried class never get tax deduction more than what consultant is entitled i.e. 50%. Further in case of consultant, you may need to get yourself registered under GST. However, there would not be any GST on billings to your UAE entity as it would amount to export of service liable for 0% GST.
Regards,
Manoj
CAclubindia
