I am a 49 year old working as an E-Surveillance engineer at a Service provider in Chennai. I am on notice period. I am planning to start my own consulting services as free lancing in the same field. I have also got one contract worth 13 lakhs on which I will start working on from August onwards. These are just my annual consulting charges which will be paid by the customer on monthly basis after deducting 10% TDS. I need to understand how will my Tax liability be calculated for this FY. I am expecting one more contract worth 3-4 lakhs. Do I need to register for GST number?
I have always done a job for 27 years. This is the first time I am doing something on my own. Hence these queries.
Ans: You have taken a good step by moving towards consulting. Having a Rs.13 Lakhs contract already is a strong starting point. Since this is your first year as a freelancer, keeping tax and compliance organised is important.
» Your Income For This FY
Your consulting receipts will generally be treated as professional income.
Your expected receipts are:
– First contract: Rs.13 Lakhs
– Possible second contract: Rs.3–4 Lakhs
– Total expected professional receipts: around Rs.16–17 Lakhs
The 10% TDS deducted by your customer is not an additional tax.
It is advance tax already collected on your behalf.
The TDS will be available as credit while filing your ITR.
» How Your Taxable Income Works
You will not normally pay income tax on the entire billing amount.
Eligible business or professional expenses can be considered while calculating taxable professional income.
For example:
– Laptop and computer expenses.
– Internet and communication costs.
– Software and subscriptions.
– Professional services.
– Office-related expenses.
– Travel related to consulting work.
– Other genuine business expenses.
Keep proper bills and payment records.
Personal expenses should not be claimed as professional expenses.
» Presumptive Tax Option
You may also check whether the presumptive taxation provisions applicable to specified professionals can be used.
This can simplify compliance for eligible professionals.
However, eligibility depends on the exact nature of your consulting activity and your receipts.
Your CA should confirm this before you choose the method.
» TDS Deduction
Your customer deducting 10% TDS does not mean your final tax rate is 10%.
It only represents tax deducted from your payment.
Your final tax liability will depend on your total taxable income for the year.
You will receive TDS credit while filing your income-tax return.
If the TDS is higher than your final liability, the excess can generally be claimed as refund.
» GST Registration
This needs careful attention.
GST registration is generally linked to aggregate turnover and the nature of services.
For service providers, the normal threshold is generally Rs.20 Lakhs in many states.
However, GST rules have several exceptions.
The place of supply and nature of your customer can also matter.
If your expected consulting turnover is around Rs.16–17 Lakhs, you may be below the normal threshold.
But do not decide only based on turnover.
Your exact consulting arrangement should be checked.
» Important GST Point
If your customer is located outside India, the GST treatment can be different.
Export of services has separate conditions.
Similarly, certain services supplied to customers in other states can require additional review.
Therefore, share the following with your CA:
– Customer location.
– Your location.
– Contract terms.
– Nature of E-Surveillance services.
– Annual contract value.
– Payment terms.
– Whether the customer is Indian or overseas.
» Advance Tax
This is another important point.
TDS may not cover your final tax liability.
If your estimated total tax payable crosses the applicable advance-tax threshold, advance tax may be required.
Do not wait until ITR filing to arrange the full tax amount.
Keep a separate bank balance for tax payments.
This will prevent cash-flow pressure later.
» Business Setup
Since you are starting freelancing after 27 years of employment, keep the setup simple initially.
Maintain:
– Separate bank account for consulting receipts.
– Proper invoices.
– Expense records.
– Customer contracts.
– TDS certificates.
– GST records if registration becomes applicable.
– Advance-tax payment records.
This will make future tax filing much easier.
» Transition From Salary To Consulting
Your first year needs extra care.
You may have salary income for part of the year.
You will then have professional income from consulting.
Both incomes will form part of your overall taxable income.
Also consider your final salary, notice-period payments, leave encashment and other employment-related receipts.
These should be included correctly.
» Retirement And Insurance
At age 49, your retirement planning should continue even after leaving employment.
EPF contributions may reduce or stop after leaving the job.
Therefore, create a separate retirement investment plan from your consulting income.
Also review your health insurance.
Do not depend only on your employer's medical cover after leaving the company.
Maintain adequate personal health insurance.
» Final Insights
Your Rs.13 Lakhs contract gives you a good base for starting consulting.
The possible Rs.3–4 Lakhs additional contract can strengthen your cash flow.
For GST, your expected Rs.16–17 Lakhs turnover appears below the normal service threshold.
Still, GST applicability depends on your customer and service details.
For income tax, the 10% TDS is only a tax credit.
Your final liability depends on your total taxable income and eligible expenses.
Since this is your first year as a consultant, I strongly suggest having a CA set up your invoicing, GST position and advance-tax schedule correctly.
Once the structure is set, managing your consulting income should become quite straightforward.
Best Regards,
K. Ramalingam, MBA, CFP,
AMFI-Registered MFD – ARN 4188
www.holisticinvestment.in
https://www.linkedin.com/in/ramalingamcfp/
