Retainership Job Offer: Do Taxes or TDS Apply to My Salary?

Hello Everyone, I have a concern. I have been offered a job on a retainership basis, which is a concept very new to me. My question here is: Is there any form of tax deduction or TDS being deducted from the salary?

Your insight on this matter will be highly appreciated.

Thanks,
Mark Anthony

Generally, consultants are retained on a retainer basis. Therefore, instead of an "Appointment Letter," the company provides a "Contract Agreement." Since it will not be an employer-employee relationship, statutory deductions like PF/ESI will not be applicable.

However, TDS under section 194J of the IT Act will be deducted. Presently, the deduction is done at 7.5%. The government could increase or decrease it in the future.

If the amount of TDS deducted exceeds your tax liability, then you can claim a refund when you file the tax return. Generally, the government makes the refund between 3-6 months.

Thanks,

Dinesh Divekar

Dear Mark-Anthony,

The deduction of tax at source is mandatory under Section 194J for fees or fees for technical services. Some illustrative examples of professional fees are fees paid to a lawyer, doctor, engineer, architect, chartered accountant, interior decorators, advertisers, etc. Technical services would include the rendering of managerial, technical, or consultancy services. Such payments made to residents are covered under Section 194J.

You can claim back the same by filing the return if deducted in excess or not under the purview of payment of tax for such income. Any payment covered under this section shall be subject to TDS at the rate of 10%. However, from 1 April 2020, the payment of fees for technical service shall be subject to TDS at the rate of 2%; it is better to consult a tax consultant for more clarity and a refund of TDS.