A growing number of India’s high-income professionals are switching from salaried roles to becoming consultants — not just for flexibility, but also for the significant tax savings it offers. CA Meenal
Goel gave this insight in her LinkedIn post.
Under the new tax regime, salaried employees earning Rs 60 lakh annually face a steep liability. With limited exemptions such as the standard deduction, HRA, and LTA, the effective tax outgo can touch nearly 30%, amounting to over Rs 18 lakh.
By contrast, consultants have greater leeway in reducing taxable income. Business income allows deductions for legitimate expenses such as office rent, employee salaries, laptops, internet, and travel. This can bring down taxable income substantially, slashing the tax bill by lakhs — even crores — in some cases.
For example, in a scenario with an annual income of Rs 24 lakh:
A salaried individual, after a Rs 75,000 standard deduction, ends up with a taxable income of Rs 23.25 lakh, leading to a tax liability of about Rs 2.9 lakh.
On the other hand, a consultant earning the same amount, but claiming Rs 12 lakh as business expenses, shows a taxable income of just Rs 12 lakh. In some cases, depending on exemptions and slab benefits, this can even mean a nil tax liability.
The trade-off, however, is clear. Salaried individuals enjoy stability, with assured paychecks, provident fund contributions, paid leave, and simpler compliance via Form 16. Consultants, meanwhile, bear higher risk with irregular income, no PF benefits, and greater responsibility for bookkeeping and compliance.
Despite these risks, the widening tax gap is prompting many high earners to exit traditional employment. While the middle class still prefers the comfort of a steady salary, India’s wealthy are increasingly embracing consultancy to retain more wealth.
