If you are a member of a recognised PF, the withdrawal of money on resignation from a job will not be taxable in your hands. The catch: you have to be in the same company for five years or more. However, at the time of changing jobs, the previous employer gives the option of withdrawal or transferring the balance in your PF account to your new employer. If the accumulated balance is transferred to your individual account in the recognised provident fund maintained by your new employer, it will be totally exempt from income tax, irrespective of the period of your employment (even if less than five years) with the previous employer under Sections 10(11) & (12) of Income tax Act, 1961. I am a cameraman and work on a contract basis with two photo studios for taking still shots of their clients. I am paid a fixed sum on weekly basis irrespective of the number of snaps I take. Does my income come under the salaried or professional? Also, since I have the option to be an employee as well, I would like to know which option is more tax efficient. The writer is a chartered accountant
- Ankit Gohil, Lucknow
If a person has to work under direct control and supervision of another person and decisions regarding performance of his duties are taken by someone else, the person is treated as an employee and the remuneration payable to him is taxable under the head "salaries". On the other hand, if the employer exercises only a supervisory control in respect of the work entrusted by him and the person has the discretion of executing the work, he is not an employee. The remuneration, in that case, is taxable under the head "business or profession". From your facts, your income will be taxable under the head "profession". Coming to the second part of your question, generally, the scope for deduction of items of expenditure against salary is limited while against business or profession, expenses like conveyance, travel, office premises, salary to a helper, etc are all allowed as deduction from your gross income thereby reducing the net taxable income and the tax liability.