Consultant Role with Salary Breakdown: Is This Legally and Technically Correct?

I have been offered a consultant position at an institute, but the appointment letter mentions pay under the head of gross salary split into basic, TA, and special allowance. Is this technically and legally correct? It also states that 10% TDS will be deducted. In such a case, should I pay the rest of the tax according to the gross pay as self-assessment tax? Will the consultant position establish an employee-employer relationship in this context?

Dear Sana,

Your client does not know the difference between salary and consulting charges. While the former can be divided into several components like basic, house rent, etc., the latter is a consolidated amount. Anyway, even without understanding the difference, they will be deducting TDS of 10%, which is legally correct. This deduction will be under Section 194J of the IT Act. In your IT assessment, you may show payment of this tax to get the input credit.

Thanks,

Dinesh Divekar

Hi Sana2017, it's been a while, and this will probably be my first contribution. I have been reading through the discussions and feel I can provide some insight.

Understanding the Consultant Role

To put it simply, as a consultant, you should have what we can call a 'deed of agreement' or any agreement specifying you as their 'consultant' and the company you are consulting with as the first party. An appointment letter is typically provided if you are under their payroll as an employee. From your post, I sense you don’t work directly under any of the directors or superiors of that company you’re referring to—please correct me if I am wrong.

Role of a Consultant

Consultation, as you know best, involves providing improvement plans and recommending the best solutions available in any pre-existing policies/procedures. It's up to the company's management whether they take it positively or seriously, but if you present it well, they might see a good future plan based on your recommendations. For example, if you are a consultant for a training program and you have surveyed the employees' career plans/paths, in order to retain them in the company and reduce turnover, you may recommend training programs tailored to their needs according to the survey/interviews. This involves costs, of course, and it's up to the company management to determine if your recommendations are feasible.

Tax Considerations

Regarding taxes, I am not familiar with that aspect, but as my suggestion above goes, you only receive consultation fees, and the tax should be paid by you as per your tax declaration.

Good luck and more power!

Regards, Shallohal
Bangladesh