Consultancy Agreement Drafting
A consultancy agreement sets the terms when you hire an independent consultant or freelancer: what they deliver, what you pay, who owns the work and how either side can exit. Under Section 17 of the Copyright Act, 1957, a freelancer owns what they create unless a written assignment says otherwise, so get it signed before work begins.
What it is
A consultancy agreement is a contract for services between a business and an independent professional. The consultant brings expertise, works on their own schedule and sends invoices. They are not on your payroll, and the agreement should make that clear in how the work is described, controlled and paid.
The terms are governed by the Indian Contract Act, 1872. Ownership of designs, code, reports and content falls under the Copyright Act, 1957, where Section 19 requires any assignment to be in writing and signed. The fee attracts TDS under Section 393 of the Income-tax Act, 2025, and the document must be stamped under the stamp law of the state where it is signed.
Who it applies to
Businesses hiring specialists
A company bringing in a tax adviser, marketing consultant, software developer, architect or interim CFO for a project or a monthly retainer.
Startups working with freelancers
Picture a Gurugram startup whose app was built by two freelancers on a WhatsApp brief. When an investor asks who owns the code, the honest answer is the freelancers. A written assignment fixes that.
Consultants and freelancers
Independent professionals who want clear scope, payment dates and a limit on how much work a client can ask for under one fee.
Why it matters
You own what you pay for
Under Section 17 of the Copyright Act, only an employee’s work belongs to the employer by default. A consultant’s logo, code or report stays theirs until it is assigned in writing.
Scope creep stops early
A written list of deliverables, revision rounds and dates heads off most fee disputes.
Tax is handled right
The agreement says whether the fee is plus GST and how TDS is deducted, so invoices and payments match.
Documents required
About the parties
- Legal name, address and PAN of both parties
- GSTIN, if registered
- Name and designation of the authorised signatory
About the engagement
- Scope of work or proposal
- Deliverables and timelines
- Fee structure: fixed, hourly, retainer or milestone-based
- Expected duration and notice period
Special terms
- Any IP, software or data the consultant will use or create
- Confidential information to be shared
- Preferred dispute forum: court or arbitration, and city
How it works
Brief us on the work
We take a short call on the work, the payment model and what worries you most.
Draft the master terms and the SOW
We draft scope, fees, TDS and GST, IP assignment, confidentiality, non-solicitation, termination, liability and dispute clauses, and add a statement of work for each project.
Revise with both sides
Both sides review the draft, and we revise it until each is ready to sign.
Pay stamp duty, then sign
We tell you the stamp duty for your state and arrange e-stamp paper. In Haryana it is generated against a GRN on the e-GRAS portal. Both parties then sign, physically or with valid electronic signatures.
Consultant or employee?
| Point | Consultant | Employee |
|---|---|---|
| Nature of contract | Contract for service | Contract of service |
| Who owns copyright by default | The consultant, until assigned (Section 17) | The employer, for work made in the course of employment |
| Tax on payment | TDS on professional fees under Section 393; GST if the consultant is registered | TDS on salary under Section 392 |
| PF, ESI, gratuity | Not applicable | Applicable as per the Labour Codes |
| Control of work | Consultant decides how; you decide what | Employer directs how, when and where |
The label on the contract does not settle the question. The working facts do. Here is the catch. A Faridabad manufacturer that calls its accounts executive a “consultant”, yet sets her fixed hours at the office under a manager on a monthly fee, has an employee in all but name. An inspector may see it the same way. If that is the real arrangement, an employment agreement is the safer document.
Timelines
Before work starts
Sign and stamp the agreement before or at signing, as Section 17 of the Indian Stamp Act, 1899 requires. Share confidential material only after that.
Each payment
Deduct TDS at 10% on professional fees (2% on fees for technical services) once payments in the year cross ₹50,000, and deposit it by the 7th of the following month (30 April for March).
At handover
In practice, we tie the IP assignment to delivery or to payment, whichever you agree. If the assignment does not state a period, Section 19 treats it as five years; if it omits territory, India.
What happens if it goes wrong
You may not own the work
Without a signed assignment, the consultant can reuse or license your logo, code or content, and you cannot register or enforce it as your own.
An unstamped agreement stalls
Under Section 35 of the Stamp Act, an unstamped agreement is not admissible in evidence until duty and a penalty of up to ten times the shortfall are paid.
Non-competes fail
Section 27 of the Contract Act makes restraints of trade void. A clause stopping a consultant from working in your industry after the contract ends will not hold; confidentiality and non-solicitation clauses are the ones to rely on.
Frequently asked questions
Is a consultancy agreement the same as a freelancer agreement?
Yes, in substance they are the same document: a contract for services with an independent professional. “Consultancy” is the usual word for advisory work and “freelancer” for creative or technical output, but the core clauses are identical. Both need scope, fees, tax terms, IP assignment, confidentiality and exit. We adjust the deliverables and IP clauses to the kind of work, whether it is a report, a design or software code.
Who owns the work a freelancer creates for my business?
The freelancer owns it unless they assign it to you in writing. Section 17 of the Copyright Act, 1957 makes the author the first owner, and the employer exception applies only to employees under a contract of service. Section 19 requires the assignment to be in writing and signed. If it skips the period, the law reads it as five years, so we draft the assignment as perpetual and worldwide where that is what you need.
What TDS applies on payments to a consultant?
TDS at 10% applies on fees for professional services under Section 393 of the Income-tax Act, 2025, once payments to the consultant cross ₹50,000 in the year. Fees for technical services attract 2%. The deducted tax is deposited by the 7th of the next month (30 April for March) and reported in the quarterly TDS statement. Our agreement states whether fees are before or after TDS, so the consultant’s invoice and your payment always reconcile.
Does the consultant need to charge GST?
A consultant must register for GST once their turnover from services crosses ₹20 lakh in a year in most states, including Haryana and Delhi. A registered consultant adds GST to the invoice at the rate that applies to the service. The agreement should say that fees are exclusive of GST and that GST is payable only against a valid tax invoice. Unregistered consultants below the limit invoice without GST.
Can I stop a consultant from working for my competitors?
Only while the contract runs. Section 27 of the Indian Contract Act, 1872 voids agreements in restraint of trade, and courts do not enforce post-contract non-competes against individuals. What does work is a strong confidentiality clause, a ban on soliciting your staff or clients, and IP assignment. Pair the agreement with a separate non-disclosure agreement if sensitive information changes hands before the main contract is signed.
Is stamp duty payable on a consultancy agreement?
Yes, a consultancy agreement must be stamped under the stamp law of the state where it is signed, before or at execution. Rates differ by state and by the article that fits the document. In Haryana, e-stamp paper is generated against a GRN on the e-GRAS portal. An unstamped agreement cannot be used as evidence until the duty and a penalty are paid. We tell you the exact duty before signing.
Can we sign the agreement electronically?
Yes, Section 5 of the Information Technology Act, 2000 gives electronic signatures the same legal recognition as handwritten ones. Aadhaar e-sign and digital signature certificates are both accepted. The agreement still needs stamp duty paid before or at signing, so we arrange e-stamp paper first and attach it to the signed copy. Both parties can sign from different cities and keep the executed PDF.
What if the consultant does not deliver or the client does not pay?
The agreement decides the first steps: a written notice, a cure period and then termination. Under Section 73 of the Contract Act, the other side compensates for loss that naturally arises from the breach. Commercial disputes usually require pre-institution mediation under Section 12A of the Commercial Courts Act unless urgent relief is needed. We draft the agreement with a clear escalation path; any legal notice or court filing is signed by a practising advocate.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
The government cost here is the stamp duty of the state where you sign, paid through e-stamp paper.
Ready to begin?
Send us the consultant’s proposal or your scope note, and we will draft the agreement around it.