Becoming a contractor in India could be one of the most rewarding and fulfilling career choices. No wonder most people nowadays go to become contractors especially given the widespread opportunities in India. You will have the opportunity to lead projects, showcase your skills, and also build a successful business. However, the question is how to become a contractor in India. While many people say that they want to become a contractor, most people do not know what it takes to start as a contractor. This is exactly why here is a guide that will provide a great starting point and a few steps to assist the journey.
Table of Contents
- What is an Independent Contractor in India?
- Essential Steps to Becoming a Contractor in India
- Managing the Business Side of Contracting in India
- Pros and Cons of Becoming a Contractor in India
- Common Mistakes New Contractors Make and How to Avoid Them
- Frequently Asked Questions (FAQs)
- Conclusion
What is an Independent Contractor in India?
Independent contractors are those people who are usually self-employed and can mostly pick and choose the projects they would like to be a part of. While a lot of them opt for short-term projects, there are others who would like to be a part of long-term work arrangements with a small number of clients. Many independent contractors are paid on an hourly basis however there is also compensation based on the project they work on.
Among these contractors also there are a few of them who actually come into the office of their clients and work side by side with the employees and might even have their own workstation. They also consist of special skills that are beneficial to the organization. They are usually only present for a few weeks to work on a project.
Essential Steps to Becoming a Contractor in India
Becoming a freelancer in India could be a win-win situation in a lot of ways. If you are looking at how to become a contractor and what would be the independent contractor steps you need to take, then here is a contractor career guide to the same. Starting as a contractor in India could either help you replace your “day job” or even help you earn a bit of extra money on the side. Here are a few contractor career tips with steps to become one.
Define Your Niche and Skills
The first step involved in becoming a freelancer is to actually decide on an industry that you want to work in. Contractors are needed no matter what industry such as IT to even marketing. Some industries may however require proper skills and qualifications along with proper experience to begin with.
It is also hence one of the contractor essentials to consist of proper skills and expertise. Defining these two areas will help you understand where you need to look for becoming a freelancer in India.
Set Up Your Business Structure
As a part of the independent contractor steps the next one will be to set up your business structure. Once you have chosen the industry that you would like to work with there are majorly three ways in which you can function as follows:
- Sole trader – This is one of the most common and simplest structures in India to become a contractor. You are the only owner and you are completely liable if things go awry.
- Limited company – A limited company also called an LLC is similar to a sole trader role however in this you are personally liable for the business’s obligations and debts.
- Partnership – A partnership is like you have your own sole trader rights but now you have to share the business’s profits, losses, and liabilities along with another partner or two.
Register Your Business
Now you might want to register your business with your local state government stating that you have been registered as an independent contractor. Regardless of which business structure you choose, you will need to pay taxes and accept the liabilities based on the one you have chosen. If you are unfamiliar with the various company structures it is always better to start with being a sole trader the first time and then decide to become registered as an LLC by submitting your PAN card details.
You might also want to attain all the contractor licenses based on the industry and also get any sort of certifications that prove you have relevant experience in that particular industry.
Get Necessary Tools and Equipment
As a part of starting as a contractor, you might need to invest in software, technology, and equipment that can support the new business. You might also want to adapt equipment based on your project requirements and specialization needed. Prioritizing safety and investing in high-quality tools will be important so that you can meet industry standards while also ensuring you get a successful project delivery.
Create a Business Plan
While becoming a freelancer in India is now set in place, it is time to come up with a proper business plan that can help you with a successful business. So here are some of the contractor business tips that you might want to check before coming up with a business plan.
- Conduct market research in India to see if your business idea is viable
- Explaining how you intend to sell your services and products to your clients
- To get proper funding while also attracting investors
- Check whether there is a plan for future expansion and whether you need to purchase certain additional equipment, hire staff, and such stuff.
Checking out all these steps and making sure they are regularly updated could lead to a great business strategy while also attaining success in the end.
Market Your Services
It is now time to start marketing your services. You might want your community to be aware of your organization. Learning marketing is a must whenever you become an independent contractor. So it is essential that you invest time to learn how to market your services based on your industry.
Several contractors also try to utilize their local network. This helps since your friends and family members could support your business and might even lead to your getting clients.
Suggested Read: Freelancer vs Independent Contractor: A Guide for Employers
Set Your Rates
Deciding on how to charge as a contractor could be as tricky as it gets. You might want to set your rates that help reflect your expertise and experience while also remaining quite competitive. Here are a few of the factors that help set your rates right.
- Project complexity – Higher rates should be applied to more specialized and complex projects
- Business costs – Do not forget to factor in your overhead costs such as office supplies, insurance, taxes, and software required.
- Industry standards – Research and check what other contractors in your field are charging. This will give you a better idea about how to charge your clients.
However, one thing you must make sure at all times is to be transparent about your pricing right from the start to avoid any sort of misunderstanding. Finding financial products that are specifically designed for contractors to help manage and optimize your business and overhead costs will make it easier to set your rates.
Build a Strong Network
Networking is surely an important part of setting up your business as an independent contractor. However for this to work you might need to make sure you go out and attend those events where you can discuss much more about your services. Building a network will also help you find clients for your business. You can also attend meetups and conferences to meet with potential clients along with other contractors.
You could also utilize online platforms such as Upwork, and LinkedIn, to showcase your skills and connect with clients better. Referrals are also a great way to ask your previous employees, friends or industry contacts to help refer to the people who might require your services.
Managing the Business Side of Contracting in India
Before starting as a contractor in India it is essential that you follow a few contractor career tips that will help you with the management of the business side. This business side mainly includes everything from handling your contracts to managing your relationships with clients. Here’s how you can successfully manage all your business stuff as a contractor.
Handling Contracts and Agreements
A written is a must when you work as an independent contractor. This document will detail all the aspects of the agreements such as the timelines, payment terms, scope of work, and any other important details. It also helps serve as a legal document that could be referred to in case there are any disputes or misunderstandings.
The contract should also define the relationship between the parties where you clarify that you are not the employee of the organization and will be responsible for your own taxes. This is important so that you do not have any issues regarding your classification and potential losses.
Taxes and Financials for Indian Contractors
Once you learn how to become a contractor in India, you will get to know that you are solely responsible for filing and paying your taxes. The good news however especially as a sole trader would be that you don’t need to fill out a separate tax return or pay additional corporate taxes. Instead, you could pay personal tax on your business profits based on the ITR-3 form.
In India, personal income is taxed using slab rates which indicates how much you need to pay. You must file your tax return by July 31 of every year. If you miss out on this deadline you could receive a fine of about 1000 to 5000 rupees.
Based on your business location and activity you might also require to pay additional taxes. On the flip side you could just claim tax deductions on multiple business expenses which also includes:
- Rent and leasing cost
- Business meals
- Utility bills
- Advertising and marketing
- Insurance premiums
Insurance Options
Getting insurance is very essential for a contracting business. It also helps mitigate the losses that might otherwise possibly incur when you run a business. You can contact your insurance agent to determine which one is the best policy for your business based on the industry and overhead costs involved.
Client Relationships Management
You will get a lot more success if you can keep up with repeat business opportunities and get your former clients to refer you to their friends. Building strong relationships could also keep your clients coming back for more. When you stay organized and manage your client relationships it is easier to work and to attain better visibility. Being communicative, responsive, and committed to delivering high-quality services that are on budget and on time will provide a better outcome.
Also Read: How to Become an Independent Contractor: Step-by-Step Guide
Pros and Cons of Becoming a Contractor in India
When you explore the pros and cons of becoming a contractor in India there are a lot of benefits you get. Here are a few of the key benefits you get as an independent contractor in India.
Flexibility
Contractors are not generally tied down to one particular client. As your work could be more project-based, you could open out to multiple projects at the same time. This gives you much freedom along with flexibility to choose how many hours you want to dedicate and where you would like to work.
Higher Income Potential
As a freelancer in India, you could increase your earning potential by making more than the employees who work in the same role for a particular organization. The potential for earning more is increased since employers do not have to make any sort of long-term commitments.
Autonomy
When you choose to become a contractor in India, you are your own boss. You get to make your own decisions as to when, where, and how you want to work. As an independent contractor, you will take on all the risks and rewards while getting value equal to the quality and quantity of jobs you get.
When you consider becoming a contractor in India, it also comes with a few of the cons which could be provided as follows.
Instability in Life
For a lot of independent contractors, it is quite hard for them to find a balance between work and life. This leads to having a challenging schedule being set every week. Therefore you need to be disciplined while also being comfortable with the workload you are taking for yourself.
Limited Job Security
Employees tend to earn a steady income whereas when you become a contractor this is not applicable. You may be extremely busy in one period and would be completely free in the next. While few contractors would find steady clients, others struggle to find clients. The work may also be seasonal and hence you need to prepare in advance to reduce the risks included.
Huge Amount of Responsibility
While there is a lot of freedom that you get when you become a contractor in India there is also a huge amount of responsibility that comes along with it. While employers need not pay taxes and social contributions, the duty falls completely on the contractor. Contractors must ensure that they pay their own taxes and make the relevant contributions.
Common Mistakes New Contractors Make and How to Avoid Them
Starting as a contractor in India is exciting however it could also give a huge hit if you keep on making mistakes. Here are a few of the common mistakes contractors tend to make which could jeopardize their career.
Underpricing Services
In order to become a successful contractor it is essential you determine what you need to charge and your value in the market. You can research the range of pay rates and check your skills to see where you fit. When you start out it may be important to lower your rates and you could build up your reputation to attract more clients.
Neglecting Professional Boundaries
As an independent contractor people could usually try to contact you via mobile phone and could try to invade your personal space. Knowing where to stop contact and keeping your personal and professional boundaries at bay could help prevent scope creep.
Ignoring Financial Planning
One of the challenges of getting into the contracting business is irregular payments and gaps in work that could stress your financial decisions. If you do not have the background it is essential you hire an accountant who could help you with the expenses, budget, and tax payments.
FAQs
What skills do I need to become a contractor in India?
To become a successful contractor in India you might want to gain the following skills:
- Estimation of costs
- Attention to details
- Communication
- Getting licensed
- Project management
How do I find clients as a new contractor in India?
If you wish to find clients as a new contractor in India you might want to try the following strategies:
- Attending webinars and online events
- Using social media
- Building your own website for better marketing
What rates should I charge as an independent contractor?
As an independent contractor, you might want to start out with at least 20% of the rate you would earn from a similar salaried job.
How can I manage taxes and compliance in India?
To manage your compliance there are several stages you need to go through along with audits and financial forecasting. There could also be indirect tax compliance such as GST which requires accurate reporting and timely filings.
How does Asanify support Indian contractors?
Asanify helps by acting as your legal employer. You will get everything you need to know about local compliance and how to manage your client relationships.
Conclusion
Having the flexibility and freedom to work on your own terms could be quite liberating. But your administrative responsibilities could possibly distract you from what you really want to be working on such as delivering great work, getting paid time, and helping your clients.
However, when you have a trusted and stable platform such as Asanify it is possible to manage these obligations quite efficiently and quickly. We could also help you by:
- Enhancing your invoice management and avoiding any manual processes
- Drafting compliance contracts for both Indian and foreign contractors
- Avoid intermediary fees and any delays especially when it comes to international client payments
- Helping you comply with local labor laws
Once you have understood how to become a contractor in India it is very simple to get started with your career. Since you have got Asanify backing you up, especially in how seamless, quick, and simple it gets.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
