In all probabilities comapny shall supply you a drafted agreement.Let some experienced lawyer look into it and suggest some alterations, modifications, to it to suit your interest.
There may be no PF, Gratuity and other terminal benefits. The consultant will not have any restriction in taking up assignments with any other organization, excepting perhaps competing organizations, in line with your contract with company. You shall be working as a full time consultant and there may be time schedule to attend and leave office.
A consultant is normally a professional offering service as per the scope of her/his assignment. A consultant may render services as an individual or as a firm or even as a corporate entity.
Again from taxation point of view, a consultant gets paid her/his remuneration, which may be in the form of a lump sum payment on assignment to assignment basis or on a retainer basis. The retainer fees may be paid on a monthly basis but still it is not in the nature of salary so long as there is no employer-employee relationship between the consultant and the employer.
The fees or remuneration received from an organization is in the nature of professional income and is assessable to Income Tax under the Head 'Income from profession' as per the Income Tax Act and Rules.
The expenses incurred by the consultant in her/his profession and relatable to her /his professions are allowed as expenditure and the remuneration net of such expenditure is assessed as income from profession.
Some examples of such business expenditure allowed is salaries paid by the consultant to her/his staff, including servants who are used to clean her/his office premises, repairs and maintenance, vehicle maintenance, traveling and conveyance, interest on loans taken by the consultant on term loans for setting up her/his office and purchase of capital equipments and working capital limits availed from any bank or even on secured and unsecured loans taken from others.
The major criterion is that the expenditure shall be relatable to her/his business or profession. Further the consultant can claim depreciation as expenditure in respect of capital assets, such as office building, plant and machinery, including computers and vehicles, which are put to use in her/his business, at the rates as prescribed in the Income Tax Rules.
The tax will be deducted at the rates prescribed under the Income Tax Act for professionals, depending upon her/his constitution and residential status. While filing his return of income, s/he has to prepare her/his profit and loss account and arrive at her/his taxable income. The consultant may be required to pay advance tax if the TDS is not sufficient to cover her/his tax liability. Consultant needs to maintain books of accounts if her/his turnover exceeds the limits specified in the Income Tax Act (normally Rs 1,20,000) in one financial year. S/he has to maintain her/his books of accounts for a period of 8 years and produce them before the Income Tax authorities, if called for. If her/his professional income exceeds Rs 10 lakhs, her/his accounts need to be audited and a tax audit report needs to be filed along with his return of income.
The actual tax liability depends upon nature of association and expenses that can be reasonably attributed to professional activities, in the case of appointment as a consultant.
Your lawyer's and CA's advice before signing the contract shall help you in the long run.
