India Consultancy Agreement
Also known as: Independent Contractor Agreement · Contract for Services · Freelance Agreement
Generate a consultancy agreement tailored to India law. Our AI incorporates India-specific statutory requirements, disclosure obligations, and legal standards into every clause.
Consultancy Agreement
Also called: Independent Contractor Agreement, Contract for Services
Legal Requirements
India Legal Requirements
Key India statutes and obligations that apply to your consultancy agreement.
Contract Labour (Regulation and Abolition) Act 1970 governs use of contract workers in principal establishments with 20+ workmen
Principal employer must obtain a Registration Certificate; contractor must obtain a Licence from the Labour Commissioner
Contractor must provide statutory benefits (PF, ESI, gratuity) to workmen employed — or principal employer bears liability
TDS (Tax Deducted at Source): Section 194C of Income Tax Act requires deduction of TDS at 1% (individual/HUF) or 2% (others) on contract payments exceeding ₹30,000 per transaction or ₹1 lakh per year
GST: contractors with turnover above ₹20 lakh must register for GST and charge applicable GST on services
Agreement should specify: deliverables, payment milestones, IP ownership, and confidentiality obligations
Restrictions & Key Considerations
Contract Labour Act prohibits use of contract labour for perennial core activities (notified under the Act)
Courts and labour tribunals look past contract labels — if workers are integrated into the principal's operations, they may be treated as employees
Principal employer remains liable for contractor's statutory obligations if contractor defaults
The gig worker debate: Draft Code on Social Security 2020 proposes extending some protections to gig and platform workers
FAQ
India Consultancy Agreement FAQ
Common questions about the consultancy agreement under India law.
Does India's Contract Labour Act apply to my business?
The Contract Labour (Regulation and Abolition) Act 1970 applies to establishments employing 20 or more contract workmen on any day in the preceding 12 months, and to contractors employing 20 or more workmen. If applicable, the principal employer must register and the contractor must be licensed — failing which both face penalties.
What TDS must be deducted on contractor payments in India?
Section 194C of the Income Tax Act 1961 requires TDS deduction at 1% for payments to individual/HUF contractors and 2% for companies or firms, when payments exceed ₹30,000 per contract or ₹1 lakh in aggregate per year. TDS must be deposited by the 7th of the following month and reported in Form 26Q.
Does a contractor need to register for GST in India?
Yes, if annual taxable turnover exceeds ₹20 lakh (₹10 lakh for special category states). GST-registered contractors must issue tax invoices and charge the applicable GST rate (18% for most professional services). The principal can claim input tax credit on the GST paid to registered contractors.
Who is responsible if a contractor doesn't pay PF/ESI to workers in India?
Under the Contract Labour Act, the principal employer bears ultimate liability if the contractor fails to provide statutory benefits (PF, ESI). Courts have repeatedly held that where a contractor defaults, the principal employer must step in. This makes it essential to include indemnity clauses in contractor agreements and verify compliance regularly.
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