New Delhi, Nov. 25 -- Many employees believe they would be financially better off working as consultants with their employers, rather than being on their payroll. The common assumption is that consultants enjoy significant income tax savings. How far is this correct? What are the risks of an employee being reclassified as a consultant?

It is true that a consultant's payment attracts a flat 10% tax deduction at source (TDS), while for an employee, tax is deducted at source based on the computation of taxable salary. However, the consultant has to file their income tax returns and pay the differential tax on their actual income.

A consultant can opt for presumptive scheme taxation when filing their returns. Under this, income is presumed ...