Professional Tax Registration and Compliance

Professional tax is a tax levied by the State government. Professional tax is levied on income however earned in any trade and is usually remitted by the Employer. The stipulations attached to professional tax, caps the total professional tax payable in respect of any one person to the State or to any local authority in the State by way of taxes on professions, trades, callings and employments to Rs.2500 per year.

Introduction to Professional Tax

Professional tax is just like Income Tax except for the fact that Income Tax is collected by the Central Government and Professional Tax is collected by the State Government. When this tax was first introduced in India, the maximum limit on the tax to be collected was Rs. 250.

Some of the State Governments have represented that the earlier celling of two hundred and fifty rupees which was fixed in 1949, needs to be revised upwards taking into consideration the price rise and other factors. It is also pointed out that the profession tax has, at present, become almost regressive because of the ceiling since even people with high salaries have to pay this tax at only the maximum amount of two hundred and fifty rupees per annum. The upward revision of profession tax to Rs.2500 per year has helped the State Governments in raising additional resources.

Professional Tax Rate

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/her income every month by the employer. The state governments of the following states have levied professional Tax – Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamil Nadu, Gujarat, Assam, Chhattisgarh, Kerala, Meghalaya, Orissa, Tripura and Madhya Pradesh. In case of salaried and wage-earners, 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. In case of other class of individuals, the tax is liable to be paid by the person himself.

Employer's Responsibility for Professional Tax

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 the payment proof is not enclosed, the return would be deemed incomplete and invalid.

Professional Tax Registration

Professional tax registration application must be submitted to the State’s tax department within 30 days of employing staff in a business. If there is more than one place of work, the application must be made separately to each authority as regards the place of work coming under the jurisdiction of that authority.

Delay in obtaining professional tax registration certificate can lead to a penalty of Rs. 5/- per day. In case of non/late payment of profession tax, the penalty will be 10% of the amount of tax. In case of late filing of returns, a penalty of Rs. 300 per return will be imposed.