This article has been written by Sugandha Nagariya, a law
student, pursuing BLS LLB at Government Law College, Mumbai and an intern at
WinSavvy.
There
are various types of taxes which are paid either to the central or the state
government and one such tax is the “Professional Tax”.
You might have noticed
it in your payslip but please don’t confuse it with income tax, as both are
different . Now have you wondered what is it or how it is deducted and may be
to whom we are paying this tax every month?
So here are your answers!!
What is a Professional Tax?
A professional tax is an indirect tax
which is paid to the state government in exchange of the services provided by
them to carry out your profession and also used for bettering the services for
professionals in the state. It is considered to be a source of revenue for the
government.
The tax is deducted from the income you earn through employment and
the employer also deducts it from your salary each month. The tax is not imposed
by all the states.
The states that impose the professional are as follows:
Punjab, Uttar Pradesh, Karnataka, Bihar, West
Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, Kerala, Meghalaya,
Odisha, Tripura, Madhya
Pradesh, Jharkhand and
Sikkim.
However,
some states like Delhi, Uttar Pradesh, Haryana, Andaman and Nicobar, Goa do not
impose profession tax.
Professional
tax was introduced in 1949 and was revised in 1988.
At the time of the introduction, the maximum annual limit of professional tax
was Rs 250. However, by 1988, this limit had increased to Rs. 2,500 per
individual. Three decades on, the limit hasn’t changed but can be changed in
the coming future.
Related: This article is part of the Business in India series. Check out other articles of this series-
- What You Need to Know Before Investing in or Setting Up a Business in India
- Memorandum - The Most Important Thing, When Starting a Company, and How to Frame it
Persons responsible to pay Professional Tax
As per the Profession, Trade, Callings and
Employment Act 2000, all professionals who earn a monthly income above a
certain level are liable to pay profession tax.
·In
case of employee or wage earners, the employer is the one responsible to deduct the professional tax from the income or wage of the
employees and the same is to be deposited to the State Government.
·Professional tax deducted from the salary of employee is to be
allowed under section 16(iii) of Income
Tax Act, 1961 at the time of computing income under the head salary
·A professional carrying out a profession such as a chartered
accountant, company secretary, lawyer, doctor, engineer etc is required to pay
the tax according to the monetary threshold if any, provided by the state
government.
·Corporates, partnership firms, sole proprietorship etc carrying
on a trade are responsible to
pay the tax to their respective state government.
·Persons who are carrying on freelancing business without any
employees are also required to pay it.
·In case you do not work in a company or have any employer, but
still you earn an income, then it is your responsibility to pay the tax to the
respective government by filling a special form.
Deduction of Tax
Professional tax is applicable as per the constitution of India
under Article 276(2) which says 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.
Professional tax calculation is based on predetermined tax
slabs by respective state government on
the basis of salary and income earned by
different set of people.
Different states have different rules regarding the tax
slabs and they are modified on a regular basis. Profession
tax is usually collected in 11 equal deductions and is usually Rs 200 per
month.
The maximum amount of tax to be imposed by the State Government
should not be more than INR 2,500. In some cases, the payment of tax is fixed
by the government.
In case of a company, directors of the company, partnerships,
individual partners, self- employed or owners
of any business undertaken in the state, the tax paid is dependent upon their
gross turnover in the preceding year and on the
gross salary for that month in, case of employees.
Ø Let’s
consider the example of an employee whose salary per month is Rs. 70,000. The
gross salary is calculated by deducting EPF, gratuity, leave deduction and loan
repayments to the company from the salary amount. The balance you will get is
the gross salary.
Let’s consider for this example that after deductions the
gross salary comes to Rs. 60,000. As a business owner, you will need to deduct
professional tax on Rs. 60,000. As per the professional tax rules in the state
of Maharashtra, as a business owner you are required to deduct Rs.200 towards
professional tax, except in the month of March, when the deduction will be
Rs.300
Ø Another
example is of a factory in the state of Uttar
Pradesh, owner of a factory has to pay professional tax only if the preceding
year turnover is greater than 6 lac rupees.
It is also advisable to certify the profession tax from a
Chartered accountant before paying. Before you hire someone to look into your legal or tax related affairs, make sure to check out how to do it legally, that is via a power of attorney.
Payment and Registration
Note: This is the part where you execute, so read slowly and carefully.
Professional tax is collected by the Commercial Tax Department
of the state government. The commercial tax department of the respective states
collects it which finally reaches the fund of Municipality Corporation.
In order to pay the tax the company or the employer is required
to obtain 2 types of certificates within 30 days of hiring the employees in
your company and if the company does not get the registration certificate
within 30 days then it is liable to pay the penalty.
The two
types of certificate are:
1.
The professional tax
Registration Certificate [PTRC]- Every employer in specific states is required to deduct taxes from
salary when paid to one or more employees and the payment made exceeds a
certain limit set up by the state government which is further deposit to the
state government, such entities are
required to obtain registration certificate.
2.
Profession tax Enrollment
Certificate [PTEC]- When person is employed in profession by two
or more employers and is getting salary exceeding a certain limit set up by the state government but
employer is not deducting professional tax then the individual needs to get
enrolment certificate from authority.
v States has made the registration of professional tax both online
as well as offline. You can either visit the state government tax website and select the
respective link from there or you can
also visit the nearest district sales tax office to complete the registration
formalities for which you will need to submit some business related documents,
so it is necessary to make a list of the documents required before visiting the
government office.
·In case the place of work is in different states or places,
application for the Registration Certificate has to be done separately to each
authority with respect to the place of work coming under that particular state
.
·If an employer has employed more than 20 employees, than he is
required to make the payment of tax within 15 days from the end of the month.
However, if an employer has less than 20 employees in his company, then he is required to pay quarterly (i.e. by the
15th of next month from the end of the quarter).
·The Indian professionals employed by a foreign diplomatic office
or an embassy are required to pay the
tax by themselves as these offices need not to get a certificate of
registration.
·Professional tax payments can either be made online or
offline by visiting the local state tax
office. Each state collects professional tax though net banking or you can pay the tax through a challan at the nearest bank
that collects it.
Documents Required For Registration
FOR COMPANIES
1.
PAN card of Company: PAN
card must be attested by the Director of the Company.
2.
Certificate of
Incorporation of the Company.
3.
Memorandum of Association
and Articles of Association of the company.
4.
Bank details of the
Company: Cancelled cheque and bank statement.
5.
List of Directors.
6.
Passport size Photographs
of all Directors.
7.
Documents of the Directors:
PAN card + I.D. Proof.
8.
Aadhar Card of the
Company.
9.
Board Resolution passed by
the Directors of the Company authorizing Professional Tax Registration and
enrollment.
10. Attendance Register & Salary Register.
11. Authorization Letter for obtaining user I.D. and Password of
Professional Tax Department.
FOR LLP/PARTNERSHIP
1.
PAN card of
LLP/Partnership Firm: PAN card must be attested by the names of the partner LLP
or any partner of Partnership firm.
2.
Certificate of
Incorporation of LLP or Registration of Partnership firm.
3.
LLP Agreement /
Partnership Deed.
4.
Bank details of
LLP/Partnership Firm: Cancelled cheque and bank statement.
5.
List of Partners.
6.
Passport size Photographs
of all Partners.
7.
Documents of the Partner:
PAN card + I.D. Proof.
8.
Aadhar Card of the Partners.
9.
Partners consent for
application to register under the Professional Tax beforehand.
10. Attendance Register & Salary Register.
11. Authorization Letter for obtaining user I.D. and Password of
Professional Tax Department.
FOR INDIVIDUAL
1.
PAN card of Proprietor,
self-attested.
2.
Premises proof of
individual Proprietorship.
3.
Bank details of
Proprietorship: Cancelled cheque and bank statement.
4.
Passport size Photographs
of the Proprietor.
5.
Documents of the
Proprietor: PAN card + I.D.
6.
Aadhar Card of the
Proprietor.
7.
Attendance Register &
Salary Register.
8.
Authorization Letter for
obtaining user I.D. and Password of Professional Tax Department.
Who All Are Exempted From the Payment Of Professional Tax
Professional tax is imposed subject to
exemption provided by respective State to
certain category of people which are as follows:
Ø Parents of children suffering from permanent disability or
mental disability.
Ø 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.
Ø Badli workers working in the textile industry.
Ø An individual suffering from a permanent physical disability
(includes blindness also).
Ø Women exclusively engaged as agent under the Mahila Pradhan
Kshetriya Bachat Yojana or Director of Small Savings.
Ø Parents or guardians of individuals with mental disability.
Ø Individuals, above 65 years of age.
Penalty For Non-Compliance
·In case you have failed to obtain or delay in obtaining a
Registration Certificate a penalty of Rs 5/- is imposed.
·In case the Employer has not paid the tax than a penalty which
is 2% of the amount of the tax is paid.
·In case of late payment of the tax of their employees by the
employer, leads to a penalty which is 10% of the amount of the tax.
·In case of late filing of returns, a penalty of Rs. 1000 per
return will be imposed and if you have filed the return after due date in 1
month. After 1 month, a penalty of Rs. 2000 will be imposed.
·If the information provided at the time of enrolment of the
certificate is found to be incorrect than a penalty of three times of the tax
amount due is imposed.
·In some cases also due to non-deposition of the tax may lead to
confiscation of the assets, and in serious matters prosecution can also file a
case against the defaulter.
Note: Different states have their different rules for non- compliance
Different Tax Slab Rates in Different States
1) Andhra Pradesh
Monthly
salary
|
Tax
(Per Month)
|
Upto
15000
|
Nil
|
15001
to 20000
|
150
|
Above
20,000
|
200
|
2) Assam
Monthly
salary
|
Tax
(Per Month)
|
Upto
10000
|
Nil
|
10000
to 15000
|
150
|
15001
to 24999
|
180
|
25000
and above
|
208
|
3) Bihar
Monthly
salary
|
Tax
(Per Month)
|
Upto
25000
|
Nil
|
25001
to 41666
|
83.33
|
41667
to 83333
|
166.67
|
83334
and above
|
208.33
|
4) Goa
Monthly
salary
|
Tax
(Per Month)
|
Upto
15000
|
Nil
|
15001
to 25000
|
150
|
25001
and above
|
200
|
5) Gujarat
Monthly
salary
|
Tax
(Per Month)
|
Upto
6000
|
Nil
|
6000
to 9000
|
80
|
9000
to 12000
|
150
|
12000
and above
|
200
|
6) Jharkhand
Monthly
salary
|
Tax
(Per Month)
|
Upto
25000
|
Nil
|
25001
to 41666
|
100
|
41667
to 66666
|
150
|
66667
to 83333
|
175
|
83334
and above
|
208
(212 in February)
|
7) Karnataka
Monthly
salary
|
Tax
(Per Month)
|
Up
to 15,000
|
NIL
|
More
than 15,000
|
200
|
8) Kerala
Monthly
salary
|
Tax
(Half Yearly)
|
Upto
1999
|
Nil
|
2000
to 2999
|
120
|
3000
to 4999
|
180
|
5000
to 7499
|
300
|
7500
to 12499
|
600
|
12500
to 16666
|
750
|
16667
to 20833
|
1000
|
20834
and above
|
1250
|
9)
Madhya Pradesh
Annual
salary
|
Tax
(Per Month)
|
Upto
1.5 Lakhs
|
Nil
|
1.5
lakhs to 1.8 lakhs
|
125
|
1.8
Lakhs and above
|
208
(212 for February)
|
10) Maharashtra
Monthly
salary
|
Tax
(Per Month)
|
Upto
7500 for Men
|
NIL
|
Upto
10000 for Women
|
NIL
|
7500
to 10000
|
175
|
10000
and above
|
200
(February-300)
|
11) Meghalaya
Annual
salary
|
Tax
(Annual)
|
Upto
50000
|
Nil
|
50001
to 75000
|
200
|
75001
to 100000
|
300
|
100001
to 150000
|
500
|
150001
to 200000
|
750
|
200001
to 250000
|
1000
|
250001
to 300000
|
1250
|
300001
to 350000
|
1500
|
350001
to 400000
|
1800
|
400001
to 450000
|
2100
|
450001
to 500000
|
2400
|
500001
and above
|
2500
|
12) Orissa
Monthly
salary
|
Tax
(Per Month)
|
Upto
5000
|
Nil
|
5001
to 6000
|
30
|
6001
to 8000
|
50
|
8001
to 10000
|
75
|
10001
to 15000
|
100
|
15001
to 20000
|
150
|
Above
20000
|
200
|
13) Sikkim
Monthly
salary
|
Tax
(Per Month)
|
Upto
20000
|
Nil
|
15001
to 30000
|
125
|
30001
to 40000
|
150
|
40001
and more
|
200
|
14) Tamil Nadu
Half
Yearly salary
|
Tax
( Per 6 Month)
|
Upto
21000
|
Nil
|
21001
to 30000
|
100
|
30001
to 45000
|
235
|
40001
to 60000
|
510
|
60001
to 75000
|
760
|
75001
and above
|
1095
|
15) Telangana
Monthly
salary
|
Tax
(Per Month)
|
Upto
15000
|
Nil
|
15001
to 20000
|
150
|
20001
and above
|
200
|
16) Tripura
Monthly
salary
|
Tax
(Half Yearly)
|
Upto
5000
|
Nil
|
5001
to 7000
|
420
|
7001
to 9000
|
720
|
9001
to 12000
|
840
|
12000
to 15000
|
1140
|
15001
and above
|
1248
|
17) West Bengal
Monthly
salary
|
Tax
(Per Month)
|
Upto
8500
|
Nil
|
8501
to 10000
|
90
|
10001
to 15000
|
110
|
15001
to 25000
|
130
|
25001
to 40000
|
150
|
More
than 40000
|
200
|
Note:
Different rates are also announced at regular intervals for various
professional and business.
Conclusion
Things that are kept in mind in the aspect of PROFESSIONAL TAX
are:
1.
It is mandatory to pay the
tax.
2.
The tax payer is eligible
for income tax deduction for the payment of professional taxi which means the
amount can be shown as a deduction from your salary in your income tax return.
3.
Whether your state imposes
the tax or not.
4.
Different states levy different
rates of professional taxes depending on tax slabs in that state.
5.
The rules governing the
professional tax may vary over time and it is advisable to check the current
rules.
6.
A unique number is
allotted by state government to every person applying for the registration certificate.
7.
Once paid, the
professional tax cannot be refunded.
Have any questions? Leave it down in the comments and we'll get back to you.
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