FuzzyPickle
FuzzyPickle

How does Contract salary work for a fulltime role

I recently received an offer from a early stage startup. But they told that that pay in contractual basis. when asked about the reason they told that it helps the company and employees to save tax.

How does it work? will it affect my future employment if I take this job? like if I join some other company will they accept that I was actually working fulltime.

The role is fulltime, but only the money transaction will happen as contractual.

10mo ago
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PerkyDumpling
PerkyDumpling

You save a lot of tax.

GroovyBoba
GroovyBoba

How do you save tax? Income tax would be the same?

MagicalBoba
MagicalBoba

Elon Musk watch video for taxation for freelancers you'll understand.

ZestyQuokka
ZestyQuokka

You fill tax under 44ADA, taxable income is 50% upto 75L

SqueakyWalrus
SqueakyWalrus
Student10mo

Ans:

1 https://cleartax.in/s/section-44ada

Ex. If you're earning 25L,

employee based tax 30% (*not flat, taken for ease of calculation) 25L-7.5Ltax = 17.5L

Contact base: 50% of total will be taxable Taxable income 12.5, 30%(* ease of calculation) (12.5tax free + 12.5 taxable) -3.6Ltax = 21.6L

So ideally you'll pay 50% less tax

  1. Now come to your question;

IMO:

1.you may face issue while seeking home loan/ car loan - at higher percentages because business income is not considered steady as compared to job

2.There're chance of future company may not consider YOE spent as 'freelancer'

3.Though there isn't any Job safety in general, contacters will be fire before normal employees. Contacters cannot be on bench.

If I'm at your place, I'ld pay extra 3.5L for job safety, company perks - medical/grp insurance, peace of mind. Listen to your guts, take a call. Life is to short to read this long ans 🥲

BouncyMochi
BouncyMochi

While laying off, they don’t give any kind of severance and save money for themselves 😂

SleepyPickle
SleepyPickle

That can be written in the contact as n month notice. In general the protections are less but it's not like companies aren't screwing over their full time employees by pipping them and asking them to resign voluntarily. A business contract has more teeth than a offer letter which is totally one sided.

FuzzyPickle
FuzzyPickle

okay, I get the tax part, but will it affect future employment? will future company consider this as fulltime experience

SleepyPickle
SleepyPickle

It will be considered as full time employment as far as experience is considered. You can show the invoices as payslips.

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