3. General Differences in Tax Treatment

An employer is required to withhold tax at the time of payment of salary to employees. The salary paid to an employee may include benefits and allowances that the employee is entitled to, which is beneficial to the employee from a tax perspective. However, with respect to independent contractors, the employer must withhold applicable taxes; however, the amount paid to the independent contractor may not be in the form of salary, but as professional fees for services performed. In both these cases, the employee and independent contractor/s will be required to file their income tax returns as prescribed under law.