A consultancy agreement engages an independent professional to deliver specific services or work product, with the consultant operating as an independent contractor. An employment agreement creates an employer-employee relationship subject to labour laws (Provident Fund, ESI, gratuity, notice period, termination protections). The two are not interchangeable. Indian labour authorities and courts look at the substance of the relationship — control, integration, financial dependence — not just the label on the contract. Misclassifying an employee as a consultant to avoid labour-law obligations can result in back-payment of statutory dues plus penalties.

Fees paid to a consultant for professional services are subject to tax deduction at source under Section 194J of the Income Tax Act at 10% on payments exceeding Rs. 30,000 in a financial year. The consultant claims credit for the TDS deducted in their own income tax return. If the consultant has not provided a PAN, the TDS rate goes up to 20%. The consultancy agreement should specify whether the stated fee is gross of TDS or net of TDS to avoid disputes.

Under Indian copyright and patent law, the default position is that the creator owns the IP unless there is a written agreement assigning it to the company that paid for the work. For consultants (unlike employees, where employer ownership is the default for work created in the course of employment), the consultancy agreement must explicitly assign IP to the engaging company if the engaging company wants to own it. Verbatra's consultancy agreement includes a comprehensive IP-assignment clause covering all deliverables, including post-execution moral rights waivers.

Unless the consultancy agreement explicitly restricts this, yes. A consultancy agreement can include a limited exclusivity provision restricting the consultant from working for direct competitors during the engagement, and this is generally enforceable in India provided it is reasonable in scope and duration. A blanket prohibition on the consultant working for anyone else, or a post-engagement non-compete that goes beyond legitimate protection of confidential information, will likely fall foul of section 27 of the Contract Act.

Yes. A consultancy agreement is a contract and is subject to stamp duty under the applicable state stamp act. The rate varies by state but is typically Rs. 100 to Rs. 500 for a general agreement. Stamping does not affect the validity of the agreement between the parties but is required if the document is to be produced as evidence in court. For long-term or high-value consulting engagements, stamping the agreement is strongly recommended.

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Verbatra produces a solid, India-specific first draft drafted by a corporate lawyer. For most standard, low-stakes contracts between commercial parties, the generated document is enough. For higher-stakes transactions, contracts that materially deviate from standard terms, contracts involving regulated industries, or anything you would be uncomfortable signing without independent review, you should have a qualified lawyer review the document before execution. Verbatra is not a substitute for advice on your specific facts.

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