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 fee will also have different rates that tend to differ 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.
Professional Tax For Self-Employed
Any professional who obtains a monthly regular income will need to pay the professional tax. By the word professional, we mean people employed in specialized fields such as accountancy, media, etc.
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.
Who are exempted from paying Professional Tax?
The Professional Tax Rules provide exemptions to the following individuals
- Parents of children suffering from mental or permanent disability.
- Members of the armed forces ( as designated in the Air Force Act, Navy Act and Army Act ) including members of auxiliary forces/reservists, serving in a particular state.
- Individuals with permanent physical disability ( inclusive of blindness)
- Individuals over the age of 65.
- Badli workers engaged in the textile industry
- Women engaged exclusively as an agent under the Directorate of Small Savings or Mahila Pradhan Kshetriya Bachat Yojana.
- Guardians or parents of mentally challenged individuals
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.
Professional Tax Registration Process in India
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.
Whether you belong to the category of a professional who is also self-employed or you employ people for your business Startupgenie can help you with Professional tax registration. Our Chartered Accountants and taxation professionals will offer you the right guidance and file the returns on your behalf.
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.
Steps involved in Online Professional Tax Registration
One Working Day: Within one working day, you will have to provide your PAN card, address proof and identity proofs of all the directors/partners/proprietors of the company. You also need to furnish the details of all employees working under you.
Two Working Days: The application form for professional tax will be then filled up by the employees and then submitted to the concerned authorities by our expert affiliates. If the documents are all provided in order, then the process will not take more than two working days.
Seven Working Days: Within five to seven working days, the basic acknowledgment will be provided by us. In case the documents are not in proper order, the inspector will ask for the missing documents. As soon as you provide the missing ones, the process will be completed. The registration hard copy will be issued within 10 days in all the major cities. In other places, it might take up to 15 to 20 working days.
Comparison Study Between Enrollment and Registration
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.
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.
Tamilnadu Professional tax:
- For salary range between 3501 and 5000 – Rs. 16.6
- For salary range between 5001 and 9000 – Rs. 126.67
- For salary range between 12,501 and above – Rs. 182.50
How can we help with Professional Tax Registration? Why Startupgenie?
We at Startupgenie are ready to assist you whenever you need. Here are some of the ways in which we can help you with online Professional Tax Registration:
Preparing The Application: It can be a muddling task to prepare the application as the terms and formalities can be a bit difficult to comprehend. Our professional tax experts do a proper assessment of the business and prepare a document for tax application with the government of the respective state.
Filling Out The Application Form: Our experts will then fill the form and submit the duly signed form with the concerned department in the respective city or town.
Registration Process: The submitted application will then be scrutinized in detail by the particular state government. Once found to be proper and perfect, the professional tax registration will be done.
FAQs on Professional Tax Registration
What is the difference between a professional tax and income tax?
Income tax is a direct tax collected by the central government from all taxpayers. It is charged on a certain percentage of their income. Whereas, professional tax is an indirect tax collected by the state government. It is charged based on a slab for people engaged in business, occupation, or employment.
What is the slab of professional tax?
Each Indian state prescribes its slab for professional tax. For example: In Maharashtra, if your monthly income is between Rs.7,500 to Rs.10,000, then the professional tax levied is Rs.175. Similarly, for monthly incomes above Rs.10,001, the tax levied is Rs.200 for 11 months and Rs.300 on the 12th month. Finally, when the monthly salary is less than Rs.7500, there is no professional tax imposed.
What is the due date of a professional tax return?
Every person who is liable to pay professional tax must file returns by December 31st of each year.
Is professional tax registration mandatory?
Any employer in particular states must deduct taxes from the employees if the salary paid exceeds the minimum slab limit and deposit with the government. That entity is required to get a registration certificate.
How can I pay my professional tax online?
One can check their state’s official website to pay the professional tax fee online. The “Professional tax e-payment” page will provide wise step-by-step information on how to pay the fee.
How do I know my professional tax is paid?
Once the payment has been made, download the payment acknowledgement receipt. The receipt indicates that the payment has been made successfully.
How do I get a professional tax certificate?
One may apply directly for a professional tax registration certificate through the official website of their state. However, it is recommended that you get professional help for the first time. Contact Startupgenie to get the certificate in no time.
How can I get my PTEC number?
Each individual who registers for a professional tax certificate will receive an official PTEC number. You can check this number on the official state website under the “Know your TIN” option. The PTEC number is shown when the PAN number is provided.
What is the penalty for the late payment of professional tax?
Like the tax imposed, the amount of the penalty is also different from one country to another. For example, the minimum penalty in Karnataka is 1.25%, while in West Bengal it is 1%.
What is the professional tax in Karnataka?
As the professional tax levied by each State varies, the maximum amount that the state of Karnataka may charge is Rs. 2400.00 as a professional tax.