Looking at the current scenario, the concept of working both for the employer and the employee is getting in a different segment. Working as a consultant is very flexible and independent, many of the company working in projects use to appoint an experienced person as a consultant. how much tax on consultancy income imposed.
How Income Tax department treat consultancy income
Basically, income from consultancy is treated as business income in the view of the income tax department, The highest tax imposed for a consultant is 11.33% which also includes the education cess. The consultant is also liable to pay service tax up to 15 % above income ₹ 10,00,000 (Ten Lakhs).
Income as a consultant up to ₹ 20000/- is not taxable.
As a consultant you must maintain books of accounting in which you can deduct all your expenses like the purchase of furniture, office infrastructure, HRA is not included, depreciation is allowed.
After deducting your gross income from your expenses, you are liable for tax for net income.
Benefits under section 44ADA of income tax act for consultants
The good news is under section 44ADA if income tax act for the consultant if a consultant opts for the scheme and if his total income is less then ₹ 50 lakhs their taxable income will reduce to half and also they will not require keeping the detailed record of it.
A person opting for the scheme required to fill advance tax in whole, if you fail to do, you are liable to pay interest under section 234C
On the other hand, a consultant can set off his loss from another business like share trading etc. and carry forward unabsorbed losses for eight succeeding years.
This is a huge benefit for a consultant since this considerably reduces taxable income and taxes.