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Professional Tax (PT) is a tax levied on the employment and profession by respective state government in India. The tax is based on slabs depending upon income of individual who may be self employed or working as employee of an entity. The nomenclature ‘Professional tax could be one of those terms which do not completely convey the real meaning of the term. Unlike the name suggests, it is just not the tax levied only on professionals. It is a tax on all kinds of professions, traders, and employment and levied based on the income of such profession, trade and employment. Professional tax is payable by the following ‘persons’ (Individuals and Business Entities) engaged in any Profession, trade, calling or employment .

  1. Employees :   Employees with salary /wage of INR 15000/- or more

  1. Employers( Business Organizations)

  • Sole proprietor

  • Partnership Firm( Registered/Unregistered)

  • Limited Company( Private/Public)

  • Limited Liability Partnership

  • Corporations and corporate Bodies

  • Hindu Undivided  Family ( HUF)

  • Trust/Trust/Club/Association

 

The professionals earning an income from salary or other practices such as a lawyer, teacher, doctor, chartered accountant, etc. are required to pay professional tax. In case of salaried and wage earners, the professional tax is liable to be deducted by the employer from the salary/wages and the same is to be deposited to the state government. Professional tax registration is mandatory within 30 days of employing staff in a business or, in the case of professionals, 30 days from the start of the practice. Application for the registration certificate should be made to the assesses 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. 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). Professional tax fee will also have different rates that tend to differ from state to state. 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.

 

 

There are two components of Professional Tax.

  1. Professional Tax- Employer ( PTEC)

Every business is assumed as employer. Every business establishment must obtain the professional tax- Employer Registration/Enrolment Certificate (EC) within 30 days of Commencement of Business. The Employer must pay professional tax of INR 2500 to the government annually.

  1. Professional Tax- Employee ( PTRC)

Every employee whose income is INR 15000 or more is liable to pay professional tax of INR 200 per month. The employer is liable to pay this amount to the government deduct this amount from the salary of the employee.

 

What is the professional tax registration process?

The professional tax registration procedure varies according to state:The tax slab rates can vary from one state to another, where the business owner have employees under different states, then one have to get a professional tax registration for all the states. The frequency with which one needs to file returns will depend on the state the person resides in before filing a return it’s important to know the rules of the state. Get registered as a payee of professional tax in a local professional tax office at that specified state. It is imperative for all the individuals and businesses that are liable for the tax payment. Calculate the pay of professional tax in the prescription form. The payment and calculations done must be audited by the chartered accountant. When it comes to employees, the employer has to deduct the salaries of employees for the professional tax. Once the person gets registered, he is then responsible to pay professional tax; different professions are specified with different PT rates.

 

      Documents required for Professional Tax

  • Acknowledgement of the online form, along with the print out of digital form submitted.

  • Copy of PAN Card

  • Address proof of  Partner/Director/Proprietor

  • Proof of Constitution of Business like Certificate of Incorporation, MOA & AOA

  • Address proof of Business place Registration:

  • Passport size photo of  Partner/Director/Proprietor

  • Blank Cancelled cheque or  bank statement

  • Establishment  Certificate

  • PAN and PTEC details

 

The states which impose professional tax in India are listed below :

  1. Andhra Pradesh

  2. Jharkhand

  3. Maharashtra

  4. Sikkim

  5. West Bengal

  6. Assam

  7. Karnataka

  8. Manipur

  9. Odisha

  10. Tamil Nadu

  11. Bihar

  12. Kerala

  13. Meghalaya

  14. Pondicherry

  15. Telangana

  16. Gujarat

  17. Madhya Pradesh

  18. Mizoram

  19. Punjab

  20. Tripura

  21. Nagaland

 

 BENEFITS OF PAYING PROFESSIONAL TAX

  1. It is a Judicial requirement: 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.

  2. To avoid Penalties: Failure to professional tax registration results in huge penalties that keep on increasing over time.

  3. 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.

  4. 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.

  5. 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.

 

Who is responsible to collect and pay professional tax?

Professional tax is collected by the commercial tax department. The commercial tax b departments of the respective states collect it which ultimately reaches the fund of Municipality Corporation. A professional tax may be paid either online/offline. Further, depending on the state’s requirement, professional tax returns also need to be filed at  specific intervals. 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.

Exemptions:

There are Exemptions provided for certain individuals to pay professional Tax under the Professional tax.

The following individuals are exempted to pay professional tax:

  • Parents of children with a permanent disability.

  • Members of the forces as defined in the Army Act, 1950, the Air Force Act, 1950 and the Navy Act, 1957 including members of auxiliary forces or reservists, serving in the state.

  • Badli workers in the textile Industry.

  • An individual suffering from a permanent physical disability ( including Blindness)

  • Women exclusively engaged as agent under the Mahila Pradhan Ksetriya Bachat Yojana or Director of Small Savings.

  • Parents or guardians of Individuals suffering from mental disability.

  • Individuals; above 65 years of age.

  • Foreign employees are exempt from paying professional tax.

  • Indians employed by foreign office and consultant are excluded from taking the certificate of registration

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