Explore all the details you need about Professional Tax Registration Certificate and Compliance, tailored for your needs.
Professional tax is a direct tax levied on persons earning an income by either practicing a profession, employment, calling, or trade. Unlike income tax imposed by the Central Government, professional tax is levied by the government of a state or union territory in India. In the 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. In the case of other classes of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one State to another, but it has a maximum limit of Rs. 2500/- per year.
Professional tax registration is mandatory for businesses or professionals operating in states or union territories that levy this tax.
For employers, professional tax must be deducted from employees' wages and paid to the respective state government, while individuals practicing a profession must pay the tax themselves.
The rate and method of professional tax collection vary from state to state, and businesses must comply with local regulations to avoid penalties.
Professional tax is applicable to a wide range of individuals and entities engaged in various professions, trades, and employment across India.
The following classes of persons are subject to professional tax:
- An Individual
- A Hindu Undivided Family (HUF)
- A Company/Firm/Co-operative Society/Association of persons or a body of individuals, whether incorporated or not
Professionals earning income from salary or practicing a profession, such as lawyers, teachers, doctors, chartered accountants, etc., are required to pay professional tax.
The maximum amount payable per annum towards professional tax is INR 2,500.
Professional tax is calculated based on the gross income of the individual and is usually deducted monthly as a slab amount.
The Commercial Taxes Department of a state/union territory is responsible for collecting professional tax based on predetermined tax slabs, which vary from state to state and union territory.
The tax is calculated on the annual taxable income of the individual. It can be paid either annually or on a monthly basis.
For salaried and wage earners, the professional tax is liable to be deducted by the employer from the salary or wages, and the employer is responsible for depositing it with the state government.
Self-employed persons who practice a profession or carry out a trade on their own and fall under the ambit of professional tax are liable to pay the tax themselves directly to the state government.
The owner of a business is responsible for deducting professional tax from the salaries of employees and paying the collected amount to the appropriate government department.
The employer must also furnish a return to the tax department in the prescribed form within the specified time, including proof of the tax payment.
Failure to include proof of payment in the return will result in the return being considered incomplete and invalid by the tax department.
Parents of children who have permanent disability or mental disability are exempt from paying professional tax.
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, are exempt.
Badli workers in the textile industry are exempt from paying professional tax.
An individual suffering from a permanent physical disability, including blindness, is exempt from professional tax.
Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana or as Directors of Small Savings are exempt.
Parents or guardians of individuals suffering from a mental disability are exempt from paying professional tax.
Individuals who are above the age of 65 are exempt from paying professional tax.
Tax registration for professionals 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 professional tax certificate should be made to the assessed state tax department within 30 days of employing staff for the business.
If the assessee has more than one place of work, the application should be made separately to each authority with respect to the place of work under the jurisdiction of that authority.
It is simple to comply with the Professional Tax Compliance, resulting in a smooth registration process with minimum restrictions.
Timely payment of Professional tax can help avoid penalties and punitive action against the Employer or a self-employed person.
Professional Tax Compliance is simple, enabling a smooth and hassle-free registration process.
The Professional Tax acts as a revenue source for state governments, helping them implement welfare and development schemes for the region.
The Employer or self-employed person can claim a deduction on the previously paid professional tax.
The process for fulfilling professional tax obligations varies by state. Below are the general steps to obtain a Professional Tax Registration Certificate in India.
The applicant must file the application form along with the requisite documents required for professional tax registration.
The applicant needs to submit the completed application form along with the necessary documents to the concerned state government. A copy of the application should also be submitted to the tax department.
Upon receipt of the application, the tax authority will scrutinize the application to ensure all provided information and documents are accurate and complete.
After successfully verifying the application, the tax authority will issue the Professional Tax Registration Certificate.
When professional tax policy becomes applicable, all such jurisdictions may impose a penalty for failure to register Profession Tax. The precise amount of the penalty will depend on state regulatory law.
There are also penalties for failing to submit the PT return by the deadline and withholding payments after they are due. Each state's professional tax regulations determine the actual fine. Businesses that fail to register professional tax, pay taxes late, or file returns on time may face fines, late fees, or imprisonment.
Failure to make a payment by the due date and failure to file a return by the due date carries additional penalties. For example, the following information outlines the penalty amount imposed by the Maharashtra Government for late filing or failure to pay Professional Tax in Maharashtra.
Nature of default: Penalty Leviable
Not obtaining PT registration: Rs.5/- per day
Late filing of PT return: Rs.1,000/-
Late payment of PT dues: Interest @1.25% p.m. + Penalty @10%
For example, professional tax of Rs.1 Lakh is delayed by 12 months, then the simple interest payable is Rs.1,250/- and a Penalty of Rs.10,000. Total = Rs.11,250
Maximum Penalty for delay in payment of Rs.1 Lakh for a year and return filing also delayed = Rs.12,250
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