Dear Friends:
My colleague wants to save tax and wants to convert from an employee to a consultant on paper within the same company he's working with. So, could anyone enlighten me on the labor laws, policies, and merits & demerits of it.
Thank you very much.
Regards,
KVE
From India, Pune
4My colleague wants to save tax and wants to convert from an employee to a consultant on paper within the same company he's working with. So, could anyone enlighten me on the labor laws, policies, and merits & demerits of it.
Thank you very much.
Regards,
KVE
From India, Pune
By changing the status from employees to consultant how are you going to save tax? Or is that your question has two sides, ie, tax saving techniques and changing the status of employee?
For tax saving techniques you may consult a Financial Adviser. But if you change the status of employee to a consultant you do not gain anything. Any remuneration paid to the consultant, ie, honorarium or fees or whatever name called, will also attract PF and other contributions. Since his job is regular in nature, he will be entitled to all statutory protection as are offered to an employee.
Regards,
Madhu.T.K
From India, Kannur
For tax saving techniques you may consult a Financial Adviser. But if you change the status of employee to a consultant you do not gain anything. Any remuneration paid to the consultant, ie, honorarium or fees or whatever name called, will also attract PF and other contributions. Since his job is regular in nature, he will be entitled to all statutory protection as are offered to an employee.
Regards,
Madhu.T.K
From India, Kannur
Dear Madhu T.K.:
Thank you for taking time to read through it and responding.
He is currently working as a Manager; however, he believes he would be able to save more on tax if he works with the same company but under the title of a consultant to the company. His job profile would remain the same it's just that on papaer he'll be a consultant to the company and not working as a Manager as was previously. I understand in this case he would not be receiving any pay slips from the company. I would like to know if he would still be eligible for paid leaves and PFs like every other employee in the company?
Looking forward to your reply.
Regards,
KVE
From India, Pune
Thank you for taking time to read through it and responding.
He is currently working as a Manager; however, he believes he would be able to save more on tax if he works with the same company but under the title of a consultant to the company. His job profile would remain the same it's just that on papaer he'll be a consultant to the company and not working as a Manager as was previously. I understand in this case he would not be receiving any pay slips from the company. I would like to know if he would still be eligible for paid leaves and PFs like every other employee in the company?
Looking forward to your reply.
Regards,
KVE
From India, Pune
Being a consultant and an employee are two different issues. The fees received by a consultant will be subject to Income Tax but not under the head Salaries but under Profits & Gains from Business and Profession. As earlier pointed out, to know the tax liability of consultant it is advisable to ask a Financial Adviser.
Regarding PF deductions, any person who does a work of regular nature by whatever name called can be subjected to EPF coverage if his salary is within the limits as prescribed under the EPF Act. Similar is the situation with ESI also. Just by declaring that one is not an employee but a consultant or professional, the Laws applicable to employees can not be avoided. There should be adequate proof to show that he does only professional service and whatever remuneration that the company pays to him is purely a fee for his expert service.
An employee who was superannuated as per the policy of the company but is allowed to continue in service considering his knowhow and expertise may be treated as a consultant in his second phase of service (ie, after retirement) In such case, he will be exempted from PF. That exemption is available to any person not being a consultant who has withdrawn his PF accumulations after attaining at least 50 years of age and who is in receipt of Provident Fund Pension.
Regards,
Madhu.T.K
From India, Kannur
Regarding PF deductions, any person who does a work of regular nature by whatever name called can be subjected to EPF coverage if his salary is within the limits as prescribed under the EPF Act. Similar is the situation with ESI also. Just by declaring that one is not an employee but a consultant or professional, the Laws applicable to employees can not be avoided. There should be adequate proof to show that he does only professional service and whatever remuneration that the company pays to him is purely a fee for his expert service.
An employee who was superannuated as per the policy of the company but is allowed to continue in service considering his knowhow and expertise may be treated as a consultant in his second phase of service (ie, after retirement) In such case, he will be exempted from PF. That exemption is available to any person not being a consultant who has withdrawn his PF accumulations after attaining at least 50 years of age and who is in receipt of Provident Fund Pension.
Regards,
Madhu.T.K
From India, Kannur
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