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 paid by the employer. The provision detailing the stipulations attached to Provisional 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 shall not exceed two hundred and fifty rupees two thousand and five hundred rupees per annum.
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 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 income every month. 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, 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. In case of other class of Individuals, this 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 of not enclosing the payment proof, the register will consider the return has incomplete and invalid.
Professional Tax Registration
The professional tax registration application must be to the State’s tax department within 30 days of employing staff in a business. If there is more than one place of work, file an application separately to each authority as regards the place of work coming under the jurisdiction of that authority
Delay in obtaining Professional Tax Registration Certificate incurs a penalty of Rs. 5/- per day. In case of late or non-payment of profession tax, the penalty will be 10% of the amount of tax. In case of late filing of returns, it imposes a penalty of Rs. 300 per return.
Professional Tax Registration FAQ’s
1. How is professional tax calculated?
In India, Professional Tax is calculated on Salary slabs. Under minimum salary, there is no tax. The maximum amount paid as Professional Tax is Rs.2500 per year. The tax slabs differ from state to state.
2. How much professional tax is deducted from my salary?
Professional Tax appears at the top of the salary slip as it is deducted even before calculating income tax. The employer deducts it from the salary of the employee and deposits it with the State Government.
3. Is it mandatory to pay professional tax?
Professional Tax is a mandatory tax paid by every individual, and there are penalties in case of non-compliance.
4. Why is professional tax different in every state?
The Professional Tax Rules vary from state to state. As the rules vary from state to state, each state can set limits and rates. But the maximum amount limit has been developed to Rs.2500 per year. The salary slab structures for levying Professional Tax differ from state to state.
5. What is a professional tax and when is it levied?
The professional tax is a state-level tax that is imposed on the income that is earned through profession, trade, calling, or employment. The tax is based on the slab that is dependent on the income o the individual who may be self-employed or working as an employee of an entity.
6. Is professional tax imposed in each state?
Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, Kerala, Meghalaya, Orissa, Tripura, Madhya Pradesh, and Sikkim.
7. Who deducts the tax and deposits the same with the government?
In the case of self-employed individuals, the tax has to be paid by the individual himself. In the case of the individuals, the liability of deducting the tax is on the employer.
8. Who has to pay professional tax in India?
Every person that is engaged actively or otherwise in any profession, trades, callings, or employment and falls under one or the other class that is mentioned in the second column of the Schedule I appended to the profession tax act, is liable to pay the professional tax.
9. What is the age limit for obtaining the professional tax registration certificate?
An employer who is obtaining the registration certificate has to apply for the same within thirty days of becoming liable to pay the tax.
10. Who is assessed under the Professional Tax Act?
The employer is liable to pay the professional tax that is assessed under the profession tax act.
