Service Tax on Contract Employee

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  1. Ranjit

    Ranjit New Member

    I am planning to move as a contract employee. I have few queries in this regard
    1) Will service tax be applicable as your post says it is income from business? The income is more than 10L.
    2) Can I claim medical, LTA, 80C deductions as I was claiming when I was salaried?

    Regards
     
  2. rudrabose

    rudrabose Active Member

    1. Yes, Service Tax would be applicable. You can charge it to the person from whom you are receiving the payment and they will pay you the service tax portion as well.
    2. You cannot claim the Medical & LTA Deduction. However you can claim the 80C Deductions. Moreover, you can also claim all the expenses incurred by you in earning this income like phone bills, fuel bills, commissions paid, office rent etc
     
  3. Ranjit

    Ranjit New Member

    Thank you for clarification. My future employer says that as it is not consultancy, but contract employment, service tax is not applicable. Can you please clarify?
     
  4. gaurav_kumar

    gaurav_kumar Well-Known Member

    If he shows you on his payrolls and deducts PF etc on your behalf - then you would be considered as an employee. Because, PF is required to be deducted for all employees.

    However, if he does not treat you as an employee - PF would not be deducted. In such cases - you would be treated as a consultant and Fee for Consultancy Services would be paid to you.

    In such cases, Service Tax would also be applicable if the amount received by you during the year is more than Rs. 10 Lakhs.
     
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