The ‘Professional tax’ is a tax, which is levied on all kinds of professions, trades, and employment, and its applicability is based on the income of such-
- Trade, and
The State Government levies professional tax and it varies from state to state. To govern the professional tax of the particular state, every state has its laws and regulations. However, all the states do follow a slab system based on the income to levy professional tax. Further, Individuals carrying on freelancing business without any employees are required to obtain Professional tax certificate subject to the pecuniary threshold if any, provided by the respective State Authorities.
A person has to pay a tax of around Rs. 2500 every year to the state or any local authority by way of Tax on the profession, trades, callings, and employments. Professional Tax is just like Income Tax, but the Central Government and Professional Tax collect the income tax managed by the State Government. The tax rates differ across all states, however, the maximum amount that can be levied as professional tax is ₹2,500 per annum.
There Are Two Types Professional Tax Certificates:-
- PTEC (Professional Tax Enrollment Certificate):
This is paid by the business entity, owner or a professional i.e. Private/ Public Limited Company, Sole Proprietor, Director Etc.
- PTRC: (Professional Tax Registration Certificate):
Government or Non- Government employer deducts the tax from the employee’s wages and deposit the same to the government.
Note- A professional tax imposed is subject to the exemption provided by the respective State to particular categories.
Professional Tax Rate
The maximum amount an individual needs to pay as Professional Tax is Rs. 2500. The slab amount is generally based on the gross income of the professional. It happens to be deducted from his/ her income every month by the employer. The following state governments levy professional Tax in India:
Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamil Nadu, Gujarat, Assam, Chhatisgarh, Kerala, Meghalaya, Orissa, Tripura, and Madhya Pradesh.
The amount deducted as Professional Tax by the employer from the salary/ wages has to deposit the same amount with the state Government.
Professional Tax Registration
The application for registration of Professional Tax must be submitted to the State 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 considering the place of work coming under that authority's jurisdiction.
If there's a delay in Professional Tax, it can lead to a penalty of Rs. 5 per day. On non-payment or late payment, there will be a penalty of 10% of the Tax if there's the late filing of returns, a penalty of Rs. Three hundred will be imposed.
Professional Tax in India is applicable for the individuals and entities mentioned here :
Companies, Firms, Limited Liability Partnerships, Corporation, Societies, Huf, Associations, Clubs, Legal Practitioners, contractors, Architects, Engineers, Insurance Agents, Chartered Accountants, Company Secretaries, Surveyors, Tax consultants, management professionals as well as medical representatives such as doctors, etc.
Who is Exempted from paying Professional Tax?
The professional tax rules provide exemptions for a few individuals; the exemptions are different based on the state you belong to. The professional tax rules provide exemptions to the following:
- Individuals serving in the Central Para Military Force (CPMF)
- People who run educational Institutions teaching up to class 12
- Handicaps with at least 40% disability. A relevant Certificate must be submitted.
- Any person who has a permit for a single three-wheeler or a single taxi to carry goods.
- Individuals who are deaf, dumb, and blind are earning a salary.
- Civilians as well as non-civilian members from the armed forces.
- Technicians from foreign countries who are employed by the state
What is the Procedure of Professional Tax Registration?
Procedure for Professional Tax registration is a State-specific query. Further, depending on the State’s requirement, Professional tax returns also need to be filed at specified intervals. Professionals/Employer seeking professional tax registration shall follow these steps:-
- Step-1- Filing The Application Online
The applicant can apply online through the CTD portal of specific state.
- Step-2-Filing The Form Along With The Requisite Documents
The applicant shall file the form along with the requisite document.
Applying In Offline Mode
One can also apply offline by submitting the application form along with the requisite documents and prescribed fee to the concerned State Government.
- Step-3-Submit Hard Copy
Once the applicant applied for registration, he/she should submit the physical copy to the concerned tax department.
- Step-4- Scrutinization By The Tax Authority
On receipt of an application, the tax authority shall scrutinize it for its correctness.
- Step-5- Issuance Of Registration Certificate
After scrutinization, if the authority gets satisfied, it shall approve the same and issue the registration certificate to the applicant. In case if the department found a flaw in the application, it can definitely raise a queries that shall be responded on time.
What Documents are Required for Professional Tax Registration?
For Professional Tax registrations, below mentioned documents are required-
- Acknowledgement of the online form, along with the print out of the digital form submitted.
- In case, the applicant is Company- COI, AOA & MOA, and PAN of the company. (Attested by the Director).
- Identity proof and address proof of all directors along with the passport size photo.
- Bank account details of the Company along with a bank statement and canceled cheque.
- Proof of Registered Office. However, in the case of rented property-NOC from the owner.
- In case of a company-Board Resolution and In case of Partnership- the Declaration of consent by the concerned Partner is required.
- Salary and attendance register.
What are the Benefits of Professional Tax Registration?
Below mentioned are the benefits of Professional Tax, which are as follows:-
- Imposes Minimal Restriction
Professional tax is simple to comply with and the compliances relating to professional tax impose very few restrictions.
- Avoid Penalty
Professional tax payment is a legal requirement, and hence ignoring it can result in any penalty or prosecution. To avoid this penalty and prosecution, the self-employed person and employer pay their professional tax without any delay, as per the rates prescribed by their concerned state.
- Easy Registered
Professional tax is easy to get registered with simplified annual or monthly compliances.
- Implementing Welfare & Development Programs
The Professional Tax is a source of revenue for the state governments which helps in implementing schemes for the various welfare and development of the region
- Can Get Professional Help
You will never have to deal with all your tax-related issues on your own again. Since you have tax professionals helping you with your tax-related work, you will never be alone again when it comes to your tax woes!
- Can Claim Deduction
The deduction can be claimed of earlier paid professional tax on salary.
What Penalties are Imposed in Case of Violation of Professional Tax Regulation?
The Penalty for violation is imposed on the individuals who default in submitting their professional tax. The states that are collecting Professional tax, imposes penalty for not registering professional tax once it has become applicable. Though, the amount of penalty varies from state to state.
- Fails To Get Registration
He will be liable to a penalty for the period during which he remains unregistered.
- Fails To Deposit To The Government/ Late Deposition
He will be liable to a penalty for the period during which he remains unregistered.
- Non-Deposition Of Amount
The officials have power to recover such amount along with applicable penalty and interest from the assets of such defaulter. Moreover, they can attach his bank account also. In serious cases, prosecution case also can be filed.
Further, states also impose penalties for failing to initiate any payment within the due date and also failing to file the return within the specified due date.
1. A penalty of Rs5/- per day is applicable on late obtaining the registration of the certificate.
2. In case of non/late payment of professional tax, the penalty will be 10% of the amount of tax. An individual is liable to pay Rs 1000 in case of late filing of returns. Also, if the delay is for more than a month, a penalty of Rs 2000 will be imposed.
Who is Accountable to Collect and Pay Professional Tax?
Professional tax is a tax that needs to be paid by every individual earning income. The calculation of the professional tax and the amount collected varies from one state to another. However, the limit has been set to Rs. 2500 per year.
The Professional tax is paid and collected at a pre-determined slab rate and is collected either annually or monthly by the Commercial Tax Department of the respective state. It is paid directly by a self-employed person engaged in a profession or trade business while in the case of salaried employees; it becomes the responsibility of the employer to pay the Professional tax to the respective State Government by deducting and depositing such tax from the employees.
Understanding the Professional Tax Registration Applicability
In the case of professional tax, firms, LLPs, corporations, societies, HUFs, associations, clubs, and companies are considered taxable entities. All the branches involved in these will also be considered separate individuals under professional tax.
Legal practitioners such as notaries and solicitors, medical representatives such as dentists, medical consultants, doctors, and other professionals such as management consultants, tax consultants, surveyors, company secretaries, chartered accountants, insurance agents, engineers, architects, and contractors are all considered 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.
Within 30 days of the company's incorporation, the company/firm must get a professional tax enrolment certificate (PTEC) by registering on the government portal.
The company/firm must have a professional tax registration certificate (PTRC) within 30 days of employing a staff member. 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 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.