How Do You Provide Payslips for Consultants with Varying Monthly Fees?

Our IT company wants to recruit some technical professionals as consultants who will not be on the company's payroll. We are planning to deduct 10% TDS on their professional fees and issue them Form 16A. Professional fees would vary each month.

Apart from Form 16A, some of them have demanded a document like a payslip. Can somebody please share any payslip/salary certificate format specifically for consultants?

Thanks in advance.

Regards,

No, you cannot issue payslips to such a consultant. That will cancel the entire benefit of putting them as a consultant.

Understanding Employment Categories Under Labor Acts

We all need to understand the basic fact that there are only two categories of employment under any Labor Act: employees on the payroll of the employer and contractor employees or independent contractors. There is no third category of employment.

The term "employee" has been clearly defined under various Acts like the Employment Exchanges (Compulsory Notification of Vacancies) Act, Employees' Provident Fund Act, ESIC Act, Minimum Wages Act, Payment of Wages Act, Payment of Gratuity Act, etc.

Consultants and Professionals in the Income Tax Act

Consultants/Professionals are terms used in the Income Tax Act only. The provisions and scope of the Income Tax Act are very much limited to one's income and liability to pay taxes. All employment-related issues are governed by the labor Acts and not by the Income Tax Act. The terms Consultants/Professionals have no meaning under any employment/labor-related acts like EPF, ESIC, ID Act, Gratuity Act, Industrial Employment Act, etc.

Misuse of Terms and Legal Implications

I have seen in most cases that employers are mixing the terms of the Income Tax Act with employment conditions just to deny the Social Security Benefits to employees, which amounts to unfair labor practice and may invite legal complications afterward. There are several court rulings in which the Honorable Court has ruled that it's the actual job work, supervision of the employer, source of payment, etc., which decide one's employment category and not one's designation as consultants/professionals, etc.

A payment slip can be provided to a person designated as a Consultant, but from an income tax point of view, a person designated as a Professional should raise a professional charges invoice and receive payment as professional fees with deductions of 10% as TDS.

Regards,
Kamal

The fact that you are deducting TDS at 10% itself shows that he is not an employee and doesn't draw a salary but only that he is paid "Consultancy Fees" (this is called a Retainer Fees) monthly, which means where is the question of giving him a payslip. What you can issue to him is a statement of month-wise fees, TDS, and net paid, which is nothing but Form 16A. As he is not an "Employee," there is no question of a payslip.

Regards,
Kumar S.

While I'm giving a payslip for consultants, is there any problem with mentioning the Basic pay? Please share a professional fee slip format.

Thank you

Kindly share the format for Consultant Payslip.

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Kindly share the format for the consultant payslip.