Which is less income tax deduction

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hariprasad achari (Querist)
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15 February 2020 Hi,

I wanted to understand, which is less income tax deduction, Consultancy services or On role job services ?

For eg. I have been paid Rs.50,000 (plus GST) as consultancy charges to me as a consultant or a job holder ?
Since for a given eg above, for consultancy services TDS may be 10% while for job it is in 3 slabs of 10, 20 and 30% and benefits of tax savings is also separate for both.

Please give me a general and approx. ways and which is more beneficial ?

Thanks and Regards
- Hari

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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16 February 2020 If you are a professional like engineer, doctor consultant option is better as you can opt 44ADA only 50% of income is taxable.

CA PARTH SHAH

CA PARTH SHAH (Expert)
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16 February 2020 If you charge consultancy fees from your employer, then there are few pros and cons

Pros:
You can claim few legitimate expenditure as business expenditure. This will reduce your tax liability.

Cons
1) TDS @ 10% shall be deducted in all cases. You will have to block this money till you file your ITR and get refund. You may apply for Lower deduction certificate from Income tax department but its quite a lengthy process.
2) Benefit of Standard deduction and HRA wont be available to you. You can claim deduction under 80GGA, but deduction is restricted to Rs 60000 pa only.
3) Benefits of PF will not be available to you.

If you choose to take your remuneration as salary, then there might not be any TDS deduction from your employer if you give disclosure of your investments if any of Rs 1,00,000. as net income upto 5 lakhs is not taxable.

So in your case if you are claiming deductions upto 1,00,000, it is better for you to get salary rather than consultancy income.

f you are a professional like engineer, doctor consultant option is better as you can opt 44ADA only 50% of income is taxable.

If you are a professional like engineer, doctor consultant option is better as you can opt 44ADA only 50% of income is taxable. However be careful. if you once choose to opt out of section 44ADA, you may not be able to choose again section 44ADA for next 5 years.

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