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Professional Tax

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Professional Tax Registration Document and Compliance

Professional tax is a direct tax levied on individuals earning income through a profession, trade, occupation, or employment. Unlike income tax, which is imposed by the central government, professional tax is collected by state or union territory governments in India.

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The professional tax rate varies across states, but the maximum annual amount that can be levied is capped at ₹2,500.

Applicability of Professional Tax

Professional tax applies to various categories, including:

✓ Individuals: All individuals earning an income through any source.
✓ Hindu Undivided Family (HUF): A legally recognized family structure under Hindu law.
✓ Companies, Firms, Cooperatives, and Associations: This includes groups of individuals, whether incorporated or not.

Professionals, such as teachers, doctors, chartered accountants, and lawyers, who earn income from their jobs or other sources, are required to pay professional tax.

States in India Where Professional Tax is Applicable

Below is a table that highlights the Indian states where professional tax is applicable and those where it is not:

Applicable States	Non-Applicable States
Andhra Pradesh	Andaman and Nicobar Islands
Assam	Arunachal Pradesh
Bihar	Chhattisgarh
Gujarat	Chandigarh
Jharkhand	Delhi
Karnataka	Goa
Kerala	Haryana
Madhya Pradesh	Himachal Pradesh
Maharashtra	Jammu and Kashmir
Manipur	Ladakh
Meghalaya	Lakshadweep
Nagaland	Rajasthan
Odisha	Uttar Pradesh
Pondicherry	Uttarakhand
Punjab
Sikkim
Tamil Nadu
Telangana
West Bengal

Expert Tax: Rates and Payment Details

Professional tax, capped at a maximum of INR 2,500 annually, is deducted monthly from an individual’s gross salary based on a slab system.

It is collected by the Commercial Taxes Department of each state or union territory according to regional tax slabs. Individuals can choose to pay it monthly or annually based on their taxable income.

Who Covers the Cost of Professional Tax?

Employers are responsible for deducting professional tax from their employees' salaries and remitting it to the state government.

Self-employed individuals must directly pay professional tax to the state government if their profession is subject to it.

Employer Obligation to Pay Professional Tax

Employers are required to withhold professional tax from employees' salaries and remit the payments to the appropriate state authority.

They must file returns along with proof of payment. Failing to submit proof may result in the return being considered incomplete or invalid.

Exemptions from Professional Tax Payment

Certain individuals are exempt from professional tax payments, including:

Certificate of Professional Tax Registration and Adherence

Within 30 days of hiring employees for their company or, in the case of independent contractors, within 30 days of beginning their practice, professionals are required to register for professional tax.

Application for a 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 jurisdiction over the respective place of work.

Dates of Payment Due for Professional Taxes

For employers with more than 20 employees: If an employer employs more than twenty people, they have to pay their employees within fifteen days of the end of each month.

For employers with fewer than 20 employees: Employers with less than twenty workers must make payments by the fifteenth of the month that follows the end of each quarter in order to be paid.

Expert Tax Return

All individuals who are liable for professional tax must file the Professional Tax Return. States have different deadlines for filing these filings.

Professional Tax Registration's Advantages

Professionals can gain from tax registration in the following ways:

Simplified Compliance: It is easy to comply with professional tax laws, which leads to a simple registration procedure with few limitations.

Preventing Penalties: The legislation requires professional tax payments to be made on time, which helps self-employed people and businesses avoid fines and other sanctions.

Easy Registration: An easy registration process is made possible by the ease of professional tax compliance.

Government Revenue Source: State governments rely on professional tax revenue to support a range of regional welfare and development initiatives.

Tax Deduction: For professional taxes that have already been paid, employers and independent contractors may deduct expenses.

Documents Needed to Register Professionally

In order to register for professional taxes, the following paperwork is needed:

✓ LLP Agreement or Certificate of Incorporation
✓ The Articles of Association (AOA) and the Memorandum of Association (MOA)
✓ PAN Card of the Owner/Director/LLP/Proprietor
✓ NOC from the property owner where the company is situated
✓ Passport-sized pictures of the director, proprietor, or owner
✓ Proof of identity and address for the proprietor, owner, or director
✓ Information on the workforce and the salary received
✓ Extra licenses and registrations where necessary

How to Get a Professional Tax Registration Certificate Procedure

Every state has a different process for acquiring a Professional Tax Registration Certificate, and each state has different deadlines for filing applications. The following actions should be taken by professionals and employers who must pay professional taxes:

✓ Submission of the Application: The candidate must fill out the application and send it along with the necessary paperwork.
✓ Submission to Authorities: The relevant state government should receive the application along with the required paperwork. Additionally, a duplicate ought to be given to the tax division.
✓ Examining the Application: The tax authority will examine the application after it is received to make sure that the information is correct.
✓ Certificate Issuance: The Professional Tax Registration Certificate will be issued by the authorities following a successful document verification process.

Penalties for Professional Tax Registration

Jurisdictions may impose fines for failing to register for professional tax when applicable. The penalties vary by state laws.

Additional Penalties May Include:

The exact fines and penalties are determined by the professional tax laws of each state. Companies may face fines, late fees, or even jail time if they fail to register, pay taxes, or file returns on time.

✔ Failure to File Returns: Not submitting the professional tax return by the due date.
✔ Late Payments: Withholding payments after the due date results in late payment fines.

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%

Further penalties apply if payments or returns are not made by the deadline. For instance, the Maharashtra government imposes fines for late filing or nonpayment of professional tax, as outlined below.

For example, if a professional tax of Rs.1 Lakh is delayed by 12 months, the interest payable is Rs.1,250, with an additional penalty of Rs.10,000. Total = Rs.11,250.

The maximum penalty for a one-year delay in payment of Rs.1 Lakh and late return filing = Rs.12,250.

Professional Tax Registration Services That Are Smooth with Taxhint

You can get help from Taxhint to make the process of getting an Indian Professional Tax Registration Certificate easier. This is how using our services can help you:

✓ Expert Guidance: Taxhint provides expert guidance on the tax registration process for professionals. Our team is well-versed in the nuances of tax regulations and ensures your registration complies with the latest rules.
✓ Application Submission: Taxhint will handle the submission of your tax registration application to the relevant authorities on your behalf, ensuring accuracy and compliance with all legal requirements.
✓ Timely Processing: With Taxhint's professional handling, you can expect timely processing of your application, reducing waiting times and allowing you to obtain your Professional Tax Certificate promptly.
✓ Customized Support: Taxhint understands that each business and profession has unique requirements. We offer personalized support tailored to your needs, ensuring your registration aligns perfectly with your professional status.
✓ Compliance Assurance: Staying updated with ever-changing tax laws and regulations is crucial. Taxhint pays attention to the details, ensuring that your registration complies with all necessary tax laws and guidelines.
✓ Customer Support: Should you have any questions or concerns during the registration process, Taxhint's customer support team is readily available to address your queries and provide timely assistance.

You can easily streamline the procedure and negotiate the intricacies of tax legislation by selecting Taxhint to fulfill your professional tax obligations.

Frequently Asked Questions?

How is professional tax calculated?

In India, Professional Tax is calculated on Salary slabs. Under minimum salary, there is no tax. The maximum amount paid as Professional Tax is Rs. 2500 per year. The tax slabs differ from state to state.

How much professional tax is deducted from my salary?

Professional Tax appears at the top of the salary slip as it is deducted before calculating income tax. The employer deducts the employee's salary and deposits it with the State Government.

Is it mandatory to pay professional tax?

Professional Tax is a mandatory tax paid by every individual, and there are penalties in case of non-compliance.

Why is professional tax different in every state?

The Professional Tax Rules vary from state to state. Each state can set limits and rates, but the maximum amount is Rs. 2500 per year. The salary slab structures for levying Professional Tax differ from state to state.

What is a professional tax and when is it levied?

The Professional Tax is a state-level tax imposed on the income earned through profession, trade, calling, or employment. The tax is based on the slab dependent on the payment of the individual who may be self-employed or working as an employee of an entity.

Is professional tax imposed in each state?

The professional tax is imposed in the following states: Andhra Pradesh, Assam, Bihar, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Pondicherry, Punjab, Sikkim, Tamil Nadu, Telangana, Tripura, and West Bengal.

Who deducts the tax and deposits the same with the government?

In the case of self-employed individuals, the tax has to be paid by the individual. In the case of others, the liability of deducting the tax is on the employer.

Who has to pay professional tax in India?

Every person engaged actively or otherwise in any profession, trade, calling, or employment and falls under the classes mentioned in the second column of the Schedule I appended to the Professional Tax Act is liable to pay the professional tax.

Who is assessed under the Professional Tax Act?

The employer must pay the professional tax assessed under the Professional Tax Act.

What is the penalty for violating Professional Tax regulations?

The penalties for not registering for professional tax or not paying the same within the due date vary by state. Typically, for non-registration, a penalty of Rs. 5 per day is levied. If you pay after the due date, you are charged 10% extra on the professional tax amount as a penalty.

Who is required to obtain a Certificate of Registration (RC)?

Every employer liable to pay professional tax on behalf of his employees for whom he pays salary/wages within the taxable limit is responsible for obtaining a Certificate of Registration.

Who are exempt from Professional Tax in India?

Exemptions from professional tax apply to specific individuals, including:

Parents of children with permanent disabilities
Members of the armed forces
Badli workers in the textile industry
Individuals with permanent physical disabilities
Women agents under certain government schemes
Guardians of individuals with mental disabilities
Individuals above 65 years of age

What is the maximum amount of professional tax levied by a state?

The maximum amount of professional tax that any state can levy is Rs. 2500.

What is the due date for payment of professional tax?

If the entity has enrolled before 31st May, the due date for payment is 30th June. For enrollments made after 31st May, the due date is 30 days before the enrollment date.