Harman Patil (Editor)

Professional Tax

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Professional tax is the tax by the state governments in India. Anyone earning an income from salary or anyone practicing a profession such as chartered accountant, company secretary, lawyer, doctor etc. are required to pay this professional tax. Different states have different rates and methods of collection. In India, professional tax is imposed at the state level. However, not all states impose this tax. The states which impose professional tax are Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, , Kerala, Meghalaya, Odisha, Tripura, Madhya Pradesh, and Sikkim. Business owners, working individuals, merchants and people carrying out various occupations comes under the purview of this tax.

Contents

Professional tax is levied by particular Municipal Corporations and majority of the Indian states impose this duty. It is a source of revenue for the government. The minimum amount payable per year is INR 25,000 and in line with tax payer's salary, there are predetermined slabs. It is also payable by members of staff employed in private companies. It is deduced by the employer every month and sent to the Municipal Corporation. It is a mandatory to pay professional tax. The tax payer is eligible for income tax deduction for this payment.

Applicability of Professional Tax as per the Constitution of India: Article 276 of the Constitution of India provides that “there shall be levied and collected a tax on professions, trades, callings and employments, in accordance with the provisions of this Act. Every person engaged in any profession, trade, calling or employment and falling under one or the other of the classes mentioned in the second column of the Schedule shall be liable to pay to the State Government tax at the rate mentioned against the class of such persons in the third column of the said Schedule. Provided that entry 23 in the Schedule shall apply only to such classes of persons as may be specified by the State Government by notification from time to time.”

Article 276 in Constitution of India, 1949

  • Notwithstanding until provisions to the contrary is made by Parliament by law, and any law so made by Parliament may be made either generally or in relation to any specified States, municipalities, boards or authorities
  • The power of the Legislature of a State to make laws as aforesaid with respect to taxes on professions, trades, callings and employments shall not be construed as limiting in any way the power of Parliament to make laws with respect to taxes on income accruing from or arising out of professions, trades, callings and employments
  • Amount

    The professional tax is a slab-amount based on the gross income of the professional and salaried employee's. It is deducted from salary of the employee every month. In case of a company, directors of a company, partnership's, individual partners, self employed professional or owner's of any business undertaken in the state, it is to be submitted depending upon there gross turnover in the preceding year. In some cases the payment of tax is fixed and is to be paid irrespective of turnover. For example in state of west bengal, owner of a factory has to pay professional tax only if the preceding year turnover is greater then 5 lac rupees and in case of companies there is a mandatory payment of rupees 2,500 /- each year as professional tax irrespective of turnover. For west bengal professional tax slabs and rates on employee or otherwise click here.

    Slab for professional tax varies across different states in India. Click here for the different slab rates.

    Responsibility of Deduction

    The owner of a business is responsible to deduct professional tax from the salaries of his employees and pay 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 the proof of tax payment. In case the payment proof is not enclosed, the return shall be deemed incomplete and invalid sec 16(iii).

    Registration

    Apply for the Registration Certificate to your state tax department within 30 days of employing staff for your business. If you have more than one place of work, apply separately to each authority as regards the place of work coming under the jurisdiction of that authority. In case of

    Deposit of Amount Deducted

  • Employers covered under the jurisdiction of “State Government” as Designated authority shall pay in the treasury by Challan through the bank. Other employers shall pay at the place of payment declared by the Designated Authorities concerned.
  • If an employer has employed more than 20 employees, he is required to make 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).
  • Source - Professional Tax in India all Details

    Penalties for Non-Compliance on Professional Tax Payment

    Delays in obtaining Registration Certificate, a penalty of Rs. 5/- per day. In case of non/late payment of profession tax, penalty will be 10% of the amount of tax. In case of late filing of returns, a penalty of Rs. 1000 per return will be imposed if you filed after due date in 1 month. After 1 month, a penalty of Rs. 2000 will be imposed.

    References

    Professional Tax Wikipedia


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