I am a software professional working for a private company as employee.They have now decided that I will work as a consultant for them and give my technical services on a 2 year contract basis.I am told 10.33% TDS will be done from consultancy charges.Will the company file my Income Tax, or i have to do it on my own?i come under 30% tax bracket. so i have to pay 30% + 10.33% tax or this 10.33% is included in the 30% filed?.I will not get HRA benefits?Then how should I do investments to minimize my tax?What are the rules for this situation?Do I get privileges of EPF and gratuity for these 2 years? Bhakti, Mumbai

The moment you are taken as professional by the company ,  you cease to be an employee under the law. The payments made by the company shall be subject to tax at source u/s 194 J of the I T Act . The rate of which is 10 % plus education cess.

Plus Points

As a salary earner , you had no chance of any expense deduction . However, now out of all receipts from your company , you can deduct all expense which you have incurred for earning those income. for example

• Depreciation on car or vehicle you go to office.
• Petrol expense
• Repairing of vehicle.
• Telephone expense.
• If you have computer , you can deduction depreciation on computer.
• If you have staff or driver

So, this will substantially reduce your taxable "professional receipts". The same amount received as Salary would not have been reduced as there was no scope for any reduction of expense.

Minus Points?

1. As a Salary earner, you had no responsibility of keeping any accounts book. However, as a professional you will have to maintain books of account as per section 44A of the I t Act. Read Who Are Required to Maintain Books of Accounts ?
2. If your total receipt is more than Rs 10 lakhs, you will have to get your accounts audited from a chartered accountant as persecution 44AB of the I T Act.
3. You will also have to pay the service tax if the gross receipt during the year exceeds Rs 10 lakh. If you cross s 9 Lakhs , you will have to be registered with Service Tax department , even though liability to pay service tax comes after one receives more than from Rs 10 lakhs in a year.

Important Points to Remember

1. As an employee , you were getting Form 16 , now the company will issue Form 16A for tax deducted at source.Keep it properly with you.
2. Keep all the bills and books of accounts for some years.
3. You will have to file return in form ITR-4 .
4. Return filing date is 30th July if the professional receipt is less than Rs 10 lakhs , but if your case is audited , then last date is 30th September
5. If your receipts are more than Rs 10 lakhs a year, get your accounts audited by 30th September of the assessment year if your accounts closes on 31/3/2009, audit must be done before 30/9/2009.
6. Claim credit for all tax deducted at source while computing the tax liability and pay advance tax  to save from interest u/s 234B and 234C.

Therefore, it is better if you take service of a good chartered accountant .