I am an individual residing in India and working from home. I am working for a US based company which has no presence in India. Should I work as Employee or Consultant? Which is best and legal? I will also be given Stock Options. As a consultant can I have stock options? What are the different taxes that I or the company have to pay and what about TDS?

generally, it is best to work as employee, for one or two years, till you collect experience, first hand inputs of the terms that you have yourself included in your Q! You may not get stock options the same way, if you are consultant; tax problems are easier if you are employee and company takes care of that thro' TDS, rather than you having to fill forms with guidance of CA experts, as consultant, with elements like service tax, which are in a flux, changing all the time in India!

As a matter of Tax planning you should work as a consultant, as you would end up paying higher taxes as an employeeThe only issue is that you cannot avail of the Stock Options as a consultant and if you want to avail those, you need to be an employee of the Company