Fixed salary or a free bird?
For consultants
Income : Fees received are taxed under the head ‘Profits and Gains from Business or Profession’.
Deduction: Standard deduction is not available. However, expenses incurred wholly for running the business/ profession, such as staff salaries, office rent, telephone bills, electricity, printing and stationery, repairs and maintenance of premises, car, laptop, depreciation etc, can be deducted from gross receipts.
Income : Fees received are taxed under the head ‘Profits and Gains from Business or Profession’.
Deduction: Standard deduction is not available. However, expenses incurred wholly for running the business/ profession, such as staff salaries, office rent, telephone bills, electricity, printing and stationery, repairs and maintenance of premises, car, laptop, depreciation etc, can be deducted from gross receipts.
Presumptive taxation scheme : Taxpayers in specified professions such as medical, legal, accountancy, engineering, technical consultancy, interior decoration etc can make use of the special provision to compute profits and gains on a presumptive basis, which also reduces their compliance burden. This scheme is available for consultants with 50 lakh or less in total gross receipts in a financial year ( 75 lakh or less if the aggregate of amounts received in cash does not exceed 5 per cent). A sum of 50 per cent of the gross receipts or higher is taxable income. No deductions for business expenses are available in this case.
Books of accounts: An individual consultant is required to maintain books of account if: a) income from consultancy crosses 2.5 lakh, or b) the gross receipts/ sales/ turnover exceeds 25 lakh in any one of the previous three financial years, or c) the consultant does not opt for presumptive taxation . There is an audit requirement if gross receipts from the consultancy exceed 50 lakh or 75 lakh, as mentioned above.
TDS : A consultant receives fees after deduction of tax (TDS) of 2 per cent or 10 per cent . However, if the expected tax liability is higher than the TDS by 10,000, advance tax needs to be paid every quarter to avoid payment of interest (as per prescribed rates).
Loss set-off: While any loss incurred can be set off against any other business income, a consultant also has the option of carrying forward unabsorbed losses for eight succeeding years.
GST: If total receipts exceed 20 lakh in a financial year ( 10 lakh for certain states), a consultant is required to register under GST, file periodic returns and issue GST compliant invoices. Filing returns, audit, and other such requirements follow.
For a salaried individual
Income: Salary income is taxed under the head ‘Income from Salary.’
Exemptions and deductions:
Under old regime, there are several exemptions and deductions – fixed standard deduction of 50,000, exemption for HRA, LTA etc. However, in new regime, only a fixed standard deduction – increased to 75,000 from 50,000, as per 2024 Budget proposals – is available.
Tax on perks: Tax applies to perks such as rent free accommodation, use of car, driver, reimbursements for fuel and maintenance of car, stock incentives, gifts, club memberships, etc.
Tax on perks: Tax applies to perks such as rent free accommodation, use of car, driver, reimbursements for fuel and maintenance of car, stock incentives, gifts, club memberships, etc.
Books of accounts: You are not required to maintain books of accounts; thus, audit requirement does not arise.
Loss set-off: A salaried individual can set-off net house property loss against employment income.
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