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POSTED BY ON January 27, 2013 11:48 pm COMMENTS (5)
I am working for a US company since last 4 years, they dont have an office in India.They treat me as an employee but since they dont have an office in India, I was filing my return as self employed professional as I could save money on house rent, office space, Electricity……etc etc.
My CA now says that I would need to pay service tax to the govt as according to some new laws almost all the professions come under this act.
My question is does it make sense for me to file ITR as a salaried individual and ask them to give me a breakup as basic salary, HRA, Fuel allowance, Medical etc..or should file normal ones as I m paying since last 4 years.
regards,
Javed
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I agree with Ashal it is better to sit with a CA or Tax professional to pin point your service tax issue & liability there on.
If service tax guys catch you then you might have to pay fine etc.
Hi Guys,
I get USD 3000 per month. Working from home full time, the company doesnt have any issues with me being treated as Employee or contractor. The onus of taxes is totally on me.Since they dont have any office in India.
Regards,
Javed
Dear Javed, 3000 USD translates into 36000 USD yly income. Which is roughly 19-20L Rs. yly income. Now If you opt for consultancy route, there are various expenses which are available to you to set off from this income to bring down your tax liability. At the same time, as rightly pointed out by dear BMA, what’s the status of your services? Are you qualifying for service tax liability or not? From the turn over point, yes, you are liable for service tax. Interestingly, whatever service tax liability is there, you w’d have to pay it from your own pocket as your US income provider ‘ll not pay any more amount towards Service Tax to you.
My take, please sit with a CA or Tax professional to pin point your service tax issue & liability there on. Your issue is more a technical issue than a personal finance issue.
On a simple note, yes, showing your consultancy income as business income may prove profitable to you.
Thanks
Ashal
Let’s consider employer-employee relationship vs technical consultancy
Employment: Under an employment arrangement, the employer is required to estimate the annual salary income of the employee and deduct TDS as per the prevailing slab rates. The current highest slab rate of tax is 30% plus surcharge and education cess . Therefore, the effective highest tax rate is 30.9%.
Consultancy: Under a consultancy arrangement, the company is required to deduct tax at the rate of 10% plus surcharge and education cess . Therefore, the effective highest tax rate could be 10.03%.
Another important factor to be kept in mind in case of consultancy arrangements is to examine whether the services rendered by the consultant would attract service tax or not.
Rate of Service Tax & Service Tax Exemption amount
However, if your turnover for last year was less than Rs. 10 lacs (applicable from 1.4.2008; previous to this the limit was Rs. 8 lacs) you don’t collect the service tax. That is only if your turnover is over 10 lacs, you must collect service tax. The service tax is payable to the government on the amount realized or received. That is the liability to pay the service tax is not based on the total billing amount.
So questions boil down to:
How does your company deduct TDS and what kind of document(Form 16) does it provide? (For consultancy under section 194J)
Are u liable to pay service tax?
Will your company agree to change in salary structure?
Dear Javed, may I know your total income from this US job?
Thanks
Ashal