Professional tax is a tax that is imposed by the State government on all salaried individuals. Professional tax is applicable to all working professionals like chartered accountants, lawyers, and doctors. It is levied based on the individual’s employment, trade or profession. The tax rates differ across all states, however, the maximum amount that can be levied as Professional tax is Rs.2, 500 per annum.

Professional Tax Applicability

Professional tax is levied on all types of trades and professions in India. It has to be paid compulsorily by every staff member who is employed in any private firm operating in India. Professional tax registration is the onus of every business owner, who must take up responsibility for deduction of professional tax and payment for the same

Professional Tax Variation with Each State

Professional tax payment will always have distinct rates that keep varying from state to state. The state governments which are levying state tax are West Bengal, Maharashtra, Karnataka, Kerala, Assam, Madhya Pradesh, Orissa, Tripura, Meghalaya, and Gujarat.

Any professional who gets a regular income on a monthly basis will have to pay the professional tax. By the term professional, we imply people working in specialized fields like accountancy, media, medicine, information technology, media, etc.

Professionals offering freelance services also need to pay professional tax using a special type of form. They can fill the form and get a registration number first. Then, using that number, they can pay their taxes in the corresponding banks.

In certain states in India, specifically , Maharashtra Profession Tax Act amended from 1.4.2018, Now a Limited Liability Partnership and each partner of LLP shall be liable to pay PT of Rs.2,500/- per annum.

Exemption from Professional Tax Payment

The following individuals are exempted from pa professional tax:

• Parents of children with a permanent disability or mental disability.
  
• Members of the armed forces, including members of auxiliary forces or reservists, serving in the state.
  
• Individuals, over 65 years of age.
  
• An individual who is physically challenged (also visually challenged).
  
• Women exclusively engaged as agent under the Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings.
  
• Parents or guardians of individuals who are mentally challenged
  
• Badli workers in the textile industry.
  

Why pay Professional Taxes? Benefits

Here are the reasons why one should never miss a professional tax payment

• It Is a Judicial Requirements
  

As per the rules and regulations of India, every employee is bound to make the professional tax payment without fail. Employers in many states of India are strictly bound by the judiciary to obtain the registration of professional tax. After the registration, they have to make the deductions and pay the service taxes of all the employees who work under them.

• To Avoid Paying Penalties
  

Failure to professional tax registration results in huge penalties that keep on increasing over time.

• Easy To Comply
  

When something is easy to comply, it won’t be difficult to follow. The professional tax regulations are so easy to follow that and not difficult to comply with. The registration procedures can be done quickly and the further proceedings are also much easier.

• Deductions
  

Deductions can be claimed in the salary on the basis of the professional tax paid. The deductions will be allowed in the year corresponding to which the taxpayer made the payments.

• The State Government Tax
  

The local authorities and the state government have the right to collect all the professional taxes based on employment, profession trades and much more. The collected amount of professional tax per annum should not go beyond Rs.2500 per an annum.

The professional tax registration procedure is very easy. Here are three important points that one needs to know and understand in detail.

• Varies According To State
  

In case you are a business owner and have employees under different states working for you, then you will have to get a professional tax registration for all the states. The tax slab rates can vary from one state to another. This can make it a cumbersome task for small-scale industries. Many states in North India do not have professional taxes.

• The Frequency of Filing Returns
  

The frequency with which one needs to file returns will depend on the state the person resides in. Hence, before filing for a return it is important to know the rules of the state.

• The Penalties That Await
  

Professional tax is applicable to all types of business entities. Professional tax can be calculated on the basis of self-assessment. It mainly depends on the professional or employee’s gross income in the half-yearly stage.

If you are a person who owns a trade or employs staff in your company or is a working professional, then you will have to register at the tax authority of the State’s professional tax department. The employer is also responsible for deducting the professional tax from his/her employee’s salary. The deducted amount shall be paid to the government when the employer files their professional tax return.

The Maharashtra government, for instance, can levy a penalty of about 10 percent the amount which was delayed. Hence, the more one avoids paying the registration, the more they will have to worry about the penalties.

Documents required for Online Professional Tax Registration

Here is a list of documents required to register for professional tax:

• Certificate of Incorporation, including MOA & AOA / LLP Agreement.
  
• PAN card of Company/LLP which is attested by the company director
  
• Place of business proof along with a NOC from the owner of the premises
  
• Bank account of the company including bank statement and cancelled cheque.
  
• Passport size photographs, address and identity proof from all the directors
  
• Board resolution or in other words, the statement of consent by the partners.
  
• Shop and establishment certificate
  
• Salary register and attendance register
  

Steps involved in Online Professional Tax Registration

• The applicant can apply online
  
• The applicant shall file the form and attach necessary scanned documents (Mentioned above)
  
• One can also apply offline by direct submitting the documents and application form with prescribed fee to the concerned State Government
  
• Once the applicant applied for registration, he/she should submit the hard copy to the concerned tax department
  
• Tax authority upon the receipt of an application shall scrutinize it for its correctness
  
• Once the department has scanned and verified the application, it shall approve the same and issue the registration certificate to the applicant
  
• Department can also raise a query in case it found a flaw in the application which shall be responded on time.
  

Traders and self-employed professionals must apply for Professional Tax Registration Certificate (PTRC) and Professional Tax Enrollment Certificate (PTEC) in their respective states.

Registration Certificate is required by entities who employ individuals and pay them wages/salary. On the other hand, PTEC is required by traders and self-employed to pay the company’s and director’s professional tax.

Hence, to conclude professional tax registration is also necessary for people who are employed. Whereas enrollment is necessary for those who own a trade, business or is involved in a profession.

Understanding the Professional Tax Returns in Detail

Professional tax is to be filed annually by all the registered employers. The return should be filed with respect to the professional tax which is deposited in the financial year. The wages/ salary of the employees should be taken into consideration while filing the tax returns. The professional tax return should always be filed during the financial year end and it should also offer an opportunity to the employer to correct any omissions or errors made within the due date of submission. Entities and enrolled people need not file any return.

Understanding the Professional Tax Registration Applicability

• Firms/ Company/LLP
  

In the case of professional tax, firms/LLP/corporations/societies/HUF/ associations/clubs/company will be considered as a taxable entity. All the branches involved in these will also be considered as a separate individual in front of the tax payment/ department of professional tax.

• Individual People(Professionals)
  

The legal practitioners like notaries and solicitors, medical representatives like dentists, medical consultants, doctors, and other professionals like management consultants, tax consultants, surveyors, company secretaries, chartered accountants, insurance agents, engineers, architects and contractors are all considered as professional individuals who need to pay professional tax.

• Partners and Directors
  

People who act as company directors, firm partners, LLP partners and designated partners should pay professional tax. They should register under the Professional Tax Act within 30 days of getting appointed in these roles.

• Employers
  

The employers are supposed to deduct professional tax from the salary of the people employed under them and submit it at the professional tax department during the time of filing returns. The employer will have to register at the Professional tax department before 30 days of its applicability.

What are the consequences of Professional Tax violation?

Though the actual penal interest or penalty can change according to each state’s legislation board, all states will be charged a penalty if they have not registered after the professional tax legislation is made applicable. Also, penalties will be charged if the payments are not made within the due date or if the return is not filed within the due date specified.

FAQs

Q. What is professional tax and when is it levied?

Professional tax is a state level tax which is imposed on income earned by way of profession, trade, calling or employment. The tax is based on slabs depending upon income of individual who may be self-employed or working as employee of an entity. At present the maximum tax that can be imposed is restricted to is Rs.2500/-.

Q. Is Professional tax imposed in every state in India?

Professional tax is imposed only in following States: Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamilnadu, Gujarat, Assam, Kerala, Meghalaya, Odisha, Tripura, Madhya Pradesh, and Sikkim.

Q. Who is responsible for deducting the tax and depositing the same with Government?

In case of individuals who are self-employed the tax has to be paid by the individual himself

In case of employed individuals, the liability is on the employer

Q. Can the professional tax liability amount be paid in lump sum?

In certain states there is concept of composition scheme. For e.g. in case of Maharashtra, the government announced composition scheme under which any person liable to make payment to government at rate of Rs.2500 may make a lump sum payment in advance of Rs.10,000 and his liability to pay for 5 years will be discharged.

For more information on this visit www.taxaj.com

Posted by Pooja

Team Taxaj