Professional tax is a direct tax levied on persons earning an income by either practicing a profession, employment, calling, or trade. Unlike income tax imposed by the Central Government, professional tax is levied by the government of a state or union territory in India. In the case of salaried and wage earners, the professional tax is liable to be deducted by the Employer from the salary/wages, and the same is to be deposited to the state government. In the case of other classes of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one State to another, but it has a maximum limit of Rs. 2500/- per year.
This tax is levied on all kinds of professions, trades, and employment. Profession tax is applicable to the following classes of persons:
The professionals earning an income from salary or other practices such as a lawyer, teachers, doctors, chartered accountants, etc. are required to pay professional tax.
Please refer to the following table to know more about the states which impose professional tax in India:
|Applicable States||Non-Applicable States|
|Assam||Andaman and Nicobar Islands|
|Karnataka||Dadra and Nagar Haveli|
|Kerala||Daman and Diu|
|Mizoram||Jammu and Kashmir|
The maximum amount payable per annum towards professional tax is INR 2,500. The professional tax is usually a slab amount based on the gross income of the professional. It is deducted from his income every month.
The Commercial Taxes Department of a state/union territory is the nodal agency that collects professional tax on the basis of predetermined tax slabs which vary for each state and union territory. The tax is calculated on the annual taxable income of the individual; however, it can be paid either annually or monthly.
In the case of Salaried and Wage-earners, the Professional Tax is liable to be deducted by the Employer from the Salary/Wages, and the Employer is liable to deposit the same with the state government.
Self-employed persons who carry out their profession or trade on their own and fall in the ambit of profession tax are liable to pay the tax themselves to the state government.
The owner of a business is responsible for deducting professional tax from the salaries of his employees and paying the amount so collected to the appropriate government department. He/she has to furnish a return to the tax department in the prescribed form within the specified time. The return should include proof of tax payment. In case of not enclosing the payment proof, the register will consider the return incomplete and invalid.
There are exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules. The following individuals are exempted to pay Professional Tax:
Professional Tax Registration is mandatory within 30 days of employing staff in a business or, in the case of professionals, 30 days from the start of the practice.
If an employer has employed more than 20 employees, he is required to make the payment within 15 days from the end of the month. However, if an employer has less than 20 employees, he is required to pay quarterly (i.e. by the 15th of next month from the end of the quarter).
The Professional Tax Return is to be filed by all the persons having Professional Tax Registration and the due dates for filing of such returns vary from State to State.
The benefits of Professional tax Registration are given below:
The procedure for Professional Tax Registration depends from State to State. Further, Returns must also be filed at specified intervals depending on the State’s requirement. Professionals /Employers seeking professional tax registration shall follow the below-mentioned procedure.
When professional tax policy becomes applicable, all such jurisdictions may impose a penalty for failure to register Profession Tax. However, the precise amount of the Penalty will depend on state regulatory law.
There are also penalties for failing to submit the PT return by the deadline and withholding payments after they are due. Each state’s professional tax regulations determine the actual fine. Businesses that fail to register professional tax, pay taxes late, or file returns on time may face fines, late fees, or imprisonment.
Failure to make a payment by the due date and failure to file a return by the due date carries additional penalties. For example, the following information outlines the penalty amount imposed by the Maharashtra Government for late filing or failure to pay Professional Tax in Maharashtra.
|Nature of default||Penalty Leviable|
|Not obtaining PT registration||Rs.5/- per day|
|Late filing of PT return||Rs.1,000/-|
|Late payment of PT dues||Interest @1.25% p.m.
For example, professional tax of ?1 Lakh is delayed by 12 months, then the simple interest payable is ?1,250/- and a Penalty of ?10,000. Total= ?11,250
Maximum Penalty for delay in payment of Rs.1 Lakh for a year and return filing also delayed = 12250
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