Contract employee income tax

[hank]

I'm a full-time contract employee. My employer deducts tax @ 6%. Would it be final tax and whether I should file under 153(1)(b) or 153(1)(c)?

[student_of_law]

STRANGE!

If you are employee, whether contractual or permanent, no tax will be deducted u/s 153. Tax will be deducted u/s 149 and it will be adjustable.
Rate on which tax is to be deducted is determined with reference to your estimated annual income under the head salary. If your annual estimated salary income is between 6.5 lac to 7.5 lac then tax rate applicable will be 6% according to first Schedule of ITO, 2001.

[hank]

The contract refers to me as consultant. Could that be the reason employer is deducting u/s 153? If that's the case, what exactly would it be, 153(b) or 153(c)?

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by hank</i>
<br />The contract refers to me as consultant. Could that be the reason employer is deducting u/s 153? If that's the case, what exactly would it be, 153(b) or 153(c)?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

It is immaterial what is the title of your designation. To determine whether a person is in employment or not one has to look at the nature of job. You say you are full time employee. The phrase full time implies that you are employee as your master has control over your working hours. If there is a relationship of master and servant. If you work under the control & supervision of your boss. If you are entitled to fixed or ascertainable remuneration, you have to follow office hours like other employees, you have to apply for leave like other employees, then you are an employee. Period of your service and amount of periodical payments are also relevant. In addition to it if your contract speaks of sick leave , annual leave etc. then it also supports that you are employee. The main test is supervision and control of employer while performing duty.

s.2(22) defines employment inclusively but it does not give exhaustive definition. Employment is to be understood in ordinary meaning.

Probably, for avoiding labour laws , your employer does not like to show you as employee. However, you will suffer for that. If he treat it as services and deduct tax u/s 153(1)(b) then it will be minimum tax. You will suffer because you will no more be a salaried individual but a non salaried individual. Rates of Tax in First Schedule of ITO,2001 for non salaried persons are significantly higher than the salaried individual.

for example if you earn Rs.6 lac annually.

As a salaried person you will have to pay tax @ 4.5% i.e. Rs.27,000 but for non-salaried rate is 10% ie. Rs.60,000.

Further salaried persons are also not allowed marginal relief and 10% medical allowance.

Ask your employer to resolve this issue.