Overview of Professional Tax
Professional tax is a tax levied by State Government on all professions and trades. The professional tax does not mean that it is only levied on individuals providing professional services like doctors, chartered accountants, lawyers, etc. This tax is levied and collected from all the individuals earning through any legitimate source of income. Further, it must be necessarily paid by all the individuals engaged in privately owned businesses. It is the duty of the proprietor of the business to deduct professional tax from its employees and pay the desired amount to the appropriate State Government’s Professional taxation department. Please note that not all the state governments levy this professional tax.
Any amount paid as Profession Tax to the State Government is allowed as a deduction under Section 16 of the Income Tax Act, 1961.
How can you get your Professional Tax Registration from TaxHelpdesk?
Once your order is placed, TaxHelpdesk’s dedicated team for reviewing of documents will check the documents uploaded by you within 24 working hours. After reviewing documents, a Tax Expert will be assigned and your order will be processed. Apart from this, you also will be able to check the status of the order in your assigned account.
Utility of Professional Tax Registration
Keeping in view the purpose and uplifting the purpose of the Constitution, professional tax is levied by the State Government which acts as a revenue for the government. The amount so collected can be used by the government for development purposes. It is usually deducted Rs. 200/- per month and a maximum of Rs. 2500/- in any financial year can be deducted.
Who Has To Obtain Professional Tax Registration?
Professional Tax registration can be obtained by:
– Employer exceeding the prescribed turnover limits
– Firms carrying on trades/professions
– Business owner having employees in different states
– Professionals offering freelance services
Procedure of obtaining of Professional Tax Registration
Professional Tax Registration is to be mandatorily obtained within 30 days of employing staff in a business or, in the case of professionals, 30 days from the start of the practice. Professional tax is to be deducted from the salary or wages paid to the employees. Application for the Professional Registration Certificate should be made to the assesse’s state tax department within 30 days of employing staff for his business. If the assesse’s has more than one place of work, then application should be made separately to each authority with respect to the place of work under the jurisdiction of that authority.
Exemption from Professional Tax Registration
The following individuals are exempted to pay 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
Due dates of Professional Tax
If an employer has employed more than 20 employees, he is required to make the 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).
List of documents to be submitted for Professional Tax
– Certificate of Incorporation / LLP Agreement
– MOA and AOA
– PAN Card of Company/LLP/Proprietor/Owner/Director
– NOC from the landlord, where the business is situated
– Passport size photos of Proprietor/Owner/Director
– Address and identity proof of Proprietor/Owner/Director
– Details of employees and salaries paid
– Additional registrations and licenses
Who is responsible to deduct & pay Professional Tax?
In case of employees, an employer is a person responsible to deduct and pay professional tax to the State Government subject to the monetary threshold, if any provided by respective State’s Professional Tax Act.
An employer (corporates, partnership firms, sole proprietorship etc) also being a person carrying on trade or profession is also required to pay professional tax on his trade or profession again subject to the monetary threshold, if any provided by respective State’s Professional Tax Act. In such a case, the employer needs to register and obtain both a Professional Tax Registration Certificate to be able to pay professional tax on his trade or profession and Professional Tax Enrolment Certificate to be able to deduct the tax from his employees and pay to the government. Further, separate registration may be required for each office depending on the respective State’s legislation.
Persons who are carrying on freelancing business without any employees are also required to register for Professional Tax and this is also subject to the monetary threshold if any, provided by the respective State’s legislation.
States in which professional tax is applicable
Following are the states wherein the Professional Tax is applicable:
- West Bengal
- Andhra Pradesh
- Assam
- Bihar
- Gujarat
- Karnataka
- Kerala
- Orissa
- Punjab
- Madhya Pradesh
- MeghalayaTamil Naidu
- Telangana
- Tripura
Penalties related to Professional Tax Registration
- For breach of rules related to the professional tax: In case of breach of the rules of professional tax, the penalty of 2% per month for the delay in making payment is imposed. In case of further delay for non-payment, a 10% additional penalty is imposed.
- Delay in obtaining the certificate of the Enrolment: Such delays attract a penalty of Re.2 per day If the information provided to obtain Certificate of enrolment was false or wrong in whatsoever manner, then the 3 times the amount due is payable in the form of penalty.
- For late return filing: Certain state has imposed Rs 300/- for every such delayed return.
Professional Tax Return
The Professional Tax Return is to be filed by all the persons having Professional Tax Registration and the due dates for filing of such returns vary from state to state.
FAQs
There are 2 types of Profession Tax payers (a) Profession Tax Enrolment Certificate (PTEC): Any person engaged in Profession, Trade and Callings and falling under one or the other of the classes mentioned in the second column of Schedule I shall obtained PTEC. (b) Profession Tax Registration Certificate (PTRC): Every employer who has employed even a single employee whose salary is above the prescribed limit for deducting Profession Tax shall obtain PTRC.
The registration number is permanent unless the certificate is cancelled.
The maximum amount of professional tax levied by a state is Rs. 2,500 which is allowed as a deduction from your salary.
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